SPEAKERS       CONTENTS       INSERTS    
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63–594

2000
INTERNET DOMAIN NAMES AND INTELLECTUAL PROPERTY RIGHTS

HEARING

BEFORE THE

SUBCOMMITTEE ON COURTS AND INTELLECTUAL
PROPERTY

OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

FIRST SESSION

JULY 28, 1999

Serial No. 42

Printed for the use of the Committee on the Judiciary
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For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402

COMMITTEE ON THE JUDICIARY
HENRY J. HYDE, Illinois, Chairman
F. JAMES SENSENBRENNER, Jr., Wisconsin
BILL McCOLLUM, Florida
GEORGE W. GEKAS, Pennsylvania
HOWARD COBLE, North Carolina
LAMAR S. SMITH, Texas
ELTON GALLEGLY, California
CHARLES T. CANADY, Florida
BOB GOODLATTE, Virginia
STEVE CHABOT, Ohio
BOB BARR, Georgia
WILLIAM L. JENKINS, Tennessee
ASA HUTCHINSON, Arkansas
EDWARD A. PEASE, Indiana
CHRIS CANNON, Utah
JAMES E. ROGAN, California
LINDSEY O. GRAHAM, South Carolina
MARY BONO, California
SPENCER BACHUS, Alabama
JOE SCARBOROUGH, Florida
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DAVID VITTER, Louisiana

JOHN CONYERS, Jr., Michigan
BARNEY FRANK, Massachusetts
HOWARD L. BERMAN, California
RICK BOUCHER, Virginia
JERROLD NADLER, New York
ROBERT C. SCOTT, Virginia
MELVIN L. WATT, North Carolina
ZOE LOFGREN, California
SHEILA JACKSON LEE, Texas
MAXINE WATERS, California
MARTIN T. MEEHAN, Massachusetts
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida
STEVEN R. ROTHMAN, New Jersey
TAMMY BALDWIN, Wisconsin
ANTHONY D. WEINER, New York

THOMAS E. MOONEY, SR., General Counsel-Chief of Staff
JULIAN EPSTEIN, Minority Chief Counsel and Staff Director

Subcommittee on Courts and Intellectual Property
HOWARD COBLE, North Carolina, Chairman
F. JAMES SENSENBRENNER, Jr., Wisconsin
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ELTON GALLEGLY, California
BOB GOODLATTE, Virginia
WILLIAM L. JENKINS, Tennessee
EDWARD A. PEASE, Indiana
CHRIS CANNON, Utah
JAMES E. ROGAN, California
MARY BONO, California

HOWARD L. BERMAN, California
JOHN CONYERS, Jr., Michigan
RICK BOUCHER, Virginia
ZOE LOFGREN, California
WILLIAM D. DELAHUNT, Massachusetts
ROBERT WEXLER, Florida

MITCH GLAZIER, Chief Counsel
BLAINE MERRITT, Counsel
VINCE GARLOCK, Counsel
DEBBIE K. LAMAN, Counsel
ROBERT RABEN, Minority Counsel
EUNICE GOLDRING, Staff Assistant

C O N T E N T S

HEARING DATE
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    July 28, 1999

OPENING STATEMENT

    Coble, Hon. Howard, a Representative in Congress from the State of North Carolina, and chairman, Subcommittee on Courts and Intellectual Property

WITNESSES

    Chasser, Anne, President, International Trademark Association (INTA)

    Cohen, Jonathan, President, Intellectual Property Constituency of the Domain Name Supporting Organization of ICANN

    Daniels, Michael A., Chairman of the Board, Network Solutions, Inc. (NSI)

    Gurry, Francis, Assistant Director General and Legal Counsel, World Intellectual Property Organization (WIPO)

    Karg, Kathlene, Director of Intellectual Property and Public Policy, Interactive Digital Software Association, on Behalf of Copyright Coalition on Domain Names

    Kirk, Mike, Executive Director, American Intellectual Property Law Association (AIPLA)

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    Pincus, Andrew J., General Counsel, Department of Commerce

    Roberts, Michael, Interim President and CEO, Internet Corporation for Assigned Names and Numbers (ICANN)

    Stubbs, Ken, Chairman of the Executive Committee, Internet Council of Registrars (CORE)

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

    Chasser, Anne, President, International Trademark Association (INTA): Prepared statement

    Cohen, Jonathan, President, Intellectual Property Constituency of the Domain Name Supporting Organization of ICANN: Prepared statement

    Daniels, Michael A., Chairman of the Board, Network Solutions, Inc. (NSI): Prepared statement
Letter to Hon. Howard Coble dated August 10, 1999
Letter to Hon. Howard L. Berman dated August 11, 1999

    Goodlatte, Hon. Bob, a Representative in Congress from the State of Virginia: Prepared statement

    Gurry, Francis, Assistant Director General and Legal Counsel, World Intellectual Property Organization (WIPO): Prepared statement
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    Karg, Kathlene, Director of Intellectual Property and Public Policy, Interactive Digital Software Association, on Behalf of Copyright Coalition on Domain Names: Prepared statement

    Kirk, Mike, Executive Director, American Intellectual Property Law Association (AIPLA): Prepared statement

    Pincus, Andrew J., General Counsel, Department of Commerce: Prepared statement

    Roberts, Michael, Interim President and CEO, Internet Corporation for Assigned Names and Numbers (ICANN): Prepared statement

    Rogan, Hon. James E., a Representative in Congress from the State of California: Prepared statement

    Stubbs, Ken, Chairman of the Executive Committee, Internet Council of Registrars (CORE): Prepared statement

APPENDIX
    Material submitted for the record

INTERNET DOMAIN NAMES AND INTELLECTUAL PROPERTY RIGHTS

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WEDNESDAY, JULY 28, 1999

House of Representatives,
Subcommittee on Courts and
Intellectual Property,
Committee on the Judiciary,
Washington, DC.

    The subcommittee met, pursuant to call, at 10 a.m., in Room 2237, Rayburn House Office Building, Hon. Howard Coble [chairman of the subcommittee] Presiding.

    Present: Representatives Coble, Goodlatte, Pease, Cannon, Rogan, Berman, Lofgren and Delahunt.

    Staff present: Mitch Glazier, Chief Counsel; Vince Garlock, Counsel; Dana Simpson, Law Clerk; Eunice Goldring, Staff Assistant; and Bari Schwartz, Minority Counsel.

OPENING STATEMENT OF CHAIRMAN COBLE

    Mr. COBLE. Good morning, ladies and gentlemen. The subcommittee will come to order.

    Permit me to, first of all, dismiss some housekeeping duties. I owe an apology to Howard Berman, Jim Rogan, Zoe Lofgren, and Mary Bono, all Californians who sit on this subcommittee, regarding the funeral of the late George Brown. The funeral is today. We tried our best to postpone today's hearing and make it later in the week, but there was simply no space available tomorrow. That left us with the decision of doing it today or assuming the risk of maybe running over into next week. We elected to go today. So, I regret that we couldn't do that.
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    With that in mind, I think it would be in order and appropriate for us to have a moment of silence in the memory of our departed friend, George Brown.

    [Moment of silence.]

    Mr. COBLE. Today, we are here to focus our attention on the rapidly changing world of the Internet. The number of domain name registrations has increased, according to one estimate, from approximately 100,000 at the beginning of 1995 to about 7.2 million at the present time. As we all know, the expansion of the Internet creates many exciting opportunities for businesses and entrepreneurs. At the same time, however, the Internet also presents many challenges to the enforcement of intellectual property rights.

    During the last session of the Congress, this subcommittee conducted two hearings on Internet domain names to access their impact on intellectual property rights, particularly the Lanham Act. At that time, Network Solutions, Inc., was the only entity registering generic domain names. The general consensus of the Internet and intellectual property communities was that congressional action was not needed. Today, however, with the creation of ICANN and the introduction of competition in the registration of domain names, there is a need to revisit this issue.

    As noted in the WIPO report, the assignment of domain names is a privately administered system and gives rise to registrations that result in a global presence, accessible from anywhere in the world. Contrast that to intellectual property rights, which are publicly administered on a territorial basis and are exercisable only within that territory. That is the crux of the problem before us.
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    This hearing will focus on the intellectual property challenges created by Internet domain names. Because the domain name system represents a fertile ground for both trademark and copyright violations, this is an area of special importance to this subcommittee. Although the introduction of competition into the registration of domain names is a positive step for the Internet, it raises significant questions for the intellectual property community. Will the new domain name governance structure adequately protect American intellectual property interests? Will intellectual property owners have access to accurate contact information in an accessible ''Whois'' database in order to protect their copyright and trademark rights? Finally, can the current system adopt policies to effectively protect intellectual property owners from cybersquatters or is Federal legislation needed?

    Some would argue that these issues should not be at the top of the agenda for the domain name industry. I do not agree. The issues we will discuss today are indicative of the challenges facing all of us as the governance of the Internet is shifted from the government to the private market. This subcommittee must ensure that, as the Internet grows and transforms itself into the dominant commerce medium of the 21st century, intellectual property concerns are adequately protected.

    I am now pleased to recognize the ranking member of the subcommittee, the distinguished gentleman from California, Mr. Berman, for his opening statement.

    Mr. BERMAN. Thank you, Mr. Chairman.

    First, let me express my appreciation, and I think that I speak for all of us from California, with your efforts to try and accommodate our needs, and I understand what you were trying to go through both in terms of witness schedules and in terms of hearing rooms. We are very grateful for those efforts. You have nothing to apologize for.
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    This is sort of a complicated subject, and this member is trying to get a grasp of all aspects of what is going on now. I think it is very timely for you, Mr. Chairman, to hold this hearing on the intersection of two very important aspects of the development of the Internet.

    It has been said before that the Internet is the engine driving our economy in the information age. Intellectual property is at the core of the Internet. In fact, what is information? Facts and intellectual property. The information age really is the intellectual property age.

    Some have said that, in light of the technological advances, a new paradigm is evolving where intellectual property no longer can be nor should it be protected by law. I hope this is a minority view.

    Some simply believe that we should get the technology in place, get the market working, and then deal with the more complex legal and policy issues. I disagree. Simply because we can distribute intellectual property to vastly wider audiences than ever before with incredible efficiency, the fundamental reasons to protect intellectual property are no less valid today than they were prior to the invention of the Internet.

    The reasons for intellectual property protection, particularly the Founding Fathers' reasons for including protection for intellectual property in the Constitution, are more important today than ever before. As technology facilitates the more efficient sharing of ideas and creative thinking, the means to evolve knowledge are more efficient.
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    As a general proposition, the willingness to express one's ideas, the free flow of expression, remains inextricably linked to the notion that one's expressions would be protected by a law under the Constitution from unauthorized exploitation by others. As the Internet grows, people are recognizing and realizing new ways to exploit their intellectual property and are finding new and extraordinary economic value in it. I see evidence of this every time the question of copyright comes up. Academics argue for their proprietary interests, publishing houses, song writers, scientists, movie studios, individuals and large corporations all fight to protect their interests in their creative works, as they should.

    This really is the intellectual property age. But I agree that there is a new paradigm. No longer is it only the responsibility of the individual to protect his or her own rights or the responsibility of the government to protect the rights of the individual. Here, to a large extent, we are privatizing that responsibility. The design of the domain name system and the rules by which registrars and registrants have to play are critical to the ability of intellectual property owners to protect their interests. It is necessary for there to be new, privately established mechanisms and rules to assist individuals in protecting their rights.

    So what I hope to hear today is a recognition that, above all, as the architecture of the domain name system is being designed and implemented, at the fore of the people who are doing this, that at the fore of your thinking is how best to facilitate the protection of intellectual property.

    I am looking for each of the responsible entities here today, the government, ICANN, NSI, and the other registrars, to give me the assurance the fodder for this new economy, information—that is, intellectual property—is being looked after. Specifically it is critical that the ''Whois'' database, whether that of NSI or the other registrars, be freely, publicly, and easily accessible without restriction and that the databases have useful and accurate information about registrants. That is important to the protection of the intellectual property and especially to consumers in e-commerce.
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    I understand that NSI has a viewpoint that conflicts with this principle, and I hope NSI understands that they are in a minority and may be alone in that belief and that many of us in Congress are concerned about your position.

    I am concerned that there be an appropriate mechanism to address trademark disputes. WIPO has made recommendations to address this. I hope ICANN will act aggressively to address this serious matter.

    In light of the pace at which competition is developing in this area, I urge ICANN to act promptly in establishing the uniform means to protect intellectual property which is placed at greater risk with every day of growth of the Internet and to enforce the terms of their accreditation agreements when those terms are not met.

    I look forward to hearing from the witnesses, Mr. Chairman. Thank you.

    Mr. COBLE. I thank the gentleman.

    As evidenced by the number of the members of the subcommittee who are here and the fact that this room is filled, there is obviously great interest in this subject. We are not in the full hearing room because there is a hearing being conducted there now. That is why we are in this room.

    I think we may well have a second round of questions, particularly for the next panel. So let's see how that goes as we develop into the morning.
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    Our first witness this morning will be Mr. Andrew Pincus, who is the General Counsel, the chief legal advisor for the Department of Commerce. Beyond his legal responsibilities, Mr. Pincus also serves as a senior policy advisor for the Secretary and the Department on a broad range of domestic and international issues, including electronic commerce, international trade, telecommunications, intellectual property rights, environmental issues, export controls, and technology.

    Mr. Pincus holds a Bachelor of Arts degree from Yale University in 1977, where he graduated cum laude, and a law degree from the Columbia University School of Law in 1991 where he was the James Kent scholar, Harlan Fiske Stone scholar, and Notice and Comments Editor of the Law Review.

    The subcommittee has copies of the witness' testimony which, without objection, will be made a part of the record.

    Mr. Pincus, we are delighted to have you with us. We on this subcommittee try to adhere to what has become known on the Hill as the 5-minute rule. When the red light illuminates in your eyes, you know that you have exhausted your time. So if you could adhere to the time limit, we would be appreciative, and we would be pleased to hear from you.

STATEMENT OF ANDREW J. PINCUS, GENERAL COUNSEL, DEPARTMENT OF COMMERCE

    Mr. PINCUS. Thank you, Mr. Chairman. It is an honor to appear before the subcommittee on this important issue.
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    Let me begin by stating what may be obvious but nonetheless needs to be iterated. We at the Commerce Department are very much aware of the importance of intellectual property to the functioning of our economy and of the need to ensure that the domain name has consistent structure to ensure that IP owners have the tools they need to protect their rights in cyberspace just as they can do in the physical world. Indeed, this is one of the basic principles underlying our domain name policy.

    In 1997, President Clinton directed Secretary Daley to transition management of the domain name system to the private sector in a way that promoted robust competition and international participation. That was the response to Internet stakeholders who were calling for change in the way that Internet names and addresses were assigned for a number of reasons.

    One of those was the conflict between trademark holders and the trade name holders who were becoming increasingly prevalent——

    Mr. COBLE. Mr. Pincus, if could you pull the mike a little closer to you, I think the folks in the back of the room could probably hear you better.

    Mr. PINCUS. I didn't see that switch.

    When a trademark is unlawfully used as a domain name, consumers may be misled about the source of the product or service that is offered on the Internet, and trademark owners may not be able to protect their rights without very expensive litigation. For cyberspace to function effectively as a commercial market, businesses must have confidence that their trademarks can be protected in that environment.
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    Following a 1-year process in which we gathered over a thousand comments in the course of multiple Requests for Comment, we issued a Statement of Policy on the Management of Internet Names and Addresses, which has become known as the White Paper. It called upon the private sector to create a new, not-for-profit corporation to assume responsibility for management of that system and also set forth a policy framework to govern that transition. The White Paper contains specific recommendations to ensure that this transition would preserve the rights that the trademark holders have in the physical word. I can briefly summarize the recommendations on IP issues that were contained in the White Paper.

    First of all, access to contact information. The White Paper made quite clear that key elements of contact information that we specified with respect to the ownership and the location of particular web sites would be available for anyone with access to the Internet. That information had to be accurate and up to date.

    We also suggested that the new management entity which was not—ICANN wasn't in existence then but has become ICANN—should adopt a number of policies designed to reduce domain name speculation involving another party's trademarks, the nefarious practice that has become known as cybersquatting.

    This included a requirement that domain name registrants should pay the registration fees at the time of registration in order to discourage speculation; that registrants should agree to submit themselves and to be bound by alternate dispute resolution processes so there would be an efficient and effective and inexpensive way to adjudicate disputes between trademark holders and domain name registrants; and that domain name registrants should agree at the time of registration to abide by processes that the new corporation would develop to deal with the issue of famous trademarks being used as domain names.
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    The White Paper also recognized the need for an in-depth examination of intellectual property issues and called for a study by the World Intellectual Property Organization of these issues.

    In the years since we issued the White Paper, a lot has happened. As I mentioned, the private sector did come together to create ICANN; and we have recognized that entity and entered into a joint Memorandum of Understanding to jointly design, develop and test the mechanisms that have to be in place in order to transition management responsibility to the private sector.

    I am pleased that, as ICANN has been up and running in the little more than 7 months since we recognized it, a number of the intellectual property recommendations that were in the White Paper have been implemented. The ICANN agreement with registrars requires them to make—collect and make available—up-to-date contact information. It also requires prepayment of registration fees, and it also includes an agreement to comply with policies on cybersquatting and famous marks as they will become developed.

    Does that conclude my——

    Mr. COBLE. We won't cut you off in the middle of a sentence, Mr. Pincus.

    Mr. PINCUS. We are also happy that WIPO expeditiously completed their worldwide process and developed what we believe is a very insightful and good report. That confirms a number of the recommendations we made in the White Paper as well as filling in the bones of those issues, and we look forward to the implementation of that agreement.
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    I will stop there and be happy to answer any of the subcommittee's questions. Thank you, Mr. Chairman.

    Mr. COBLE. Thank you, Mr. Pincus.

    [The prepared statement of Mr. Pincus follows:]

PREPARED STATEMENT OF ANDREW J. PINCUS, GENERAL COUNSEL, DEPARTMENT OF COMMERCE

    Thank you for the opportunity to appear here today. I would like to review for you, very briefly, the history of the United State Government's involvement in the domain name system, especially as it relates to the interplay between domain names and intellectual property protection.

    Before I begin that review, however, I want to articulate several principles that are an important part of the Administration's policy in this area.

 It is imperative that intellectual property owners have the tools they need to enforce their rights in cyberspace.

 We strongly support the development of appropriate mechanisms to deter actors who in bad faith register domain names to mislead consumers and wrongly capitalize on the good will of trademark owners.

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 Intellectual property owners should be active participants in the Internet Corporation for Assigned Names and Numbers (ICANN) process, and the ICANN process should take into account the needs of intellectual property owners in developing policies for the domain name system.

BACKGROUND

    Domain names are the familiar and easy-to-remember names for Internet computers (e.g., ''www.ecommerce.gov''). They map to unique Internet Protocol (IP) numbers (e.g., 98.37.241.30) that serve as routing addresses on the Internet. The domain name system (DNS) translates Internet names into the IP numbers needed for transmission of information across the network.

    Today's Internet is an outgrowth of U.S. Government investments in packet-switching technology and communications networks carried out under agreements with the Defense Advanced Research Projects Agency (DARPA), the National Science Foundation (NSF) and other U.S. research agencies. The Government encouraged bottom-up development of networking technologies through work at NSF, which established the NSFNET as a network for research and education. The NSFNET fostered a wide range of applications, and in 1992 the U.S. Congress gave the NSF statutory authority to commercialize the NSFNET, which formed the basis for today's Internet.

    As a legacy, major components of the domain name system are still performed by or subject to agreements with agencies of the U.S. Government.

    The domain name space is constructed as a hierarchy. It is divided into top-level domains (TLDs), with each TLD then divided into second-level domains (SLDs), and so on. More than 200 national, or country-code, TLDs (ccTLDs) are administered by their corresponding governments or by private entities with the appropriate national government's acquiescence. A small set of generic top-level domains (gTLDs) does not carry any national identifier, but denote the intended function of that portion of the domain space. For example, .com was established for commercial users, .org for not-for-profit organizations, and .net for network service providers. The registration and propagation of these key gTLDs are still performed by Network Solutions, Inc. (NSI), a Virginia-based company, under a continuation of some of the terms of its five-year cooperative agreement with NSF.
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THE NEED FOR CHANGE

    From its origins as a U.S.-based research vehicle, the Internet has become an international medium for commerce, education and communication. So the traditional means of organizing its technical functions need to evolve as well. The pressures for change has come from many different quarters:

 There is widespread dissatisfaction about the absence of competition in domain name registration.

 The mechanisms for resolving conflict between trademark holders and domain name holders are expensive and cumbersome.

 Without changes, a proliferation of lawsuits could lead to chaos as tribunals around the world apply the antitrust law and intellectual property law of their jurisdictions to the Internet.

 Many commercial interests, staking their future on the successful growth of the Internet, want a more formal and robust management structure.

 An increasing percentage of Internet users reside outside of the United States, and those stakeholders want a larger voice in Internet coordination.

 As Internet names increasingly have commercial value, the decision to add new top-level domains cannot continue to be made on an ad hoc basis by entities or individuals that are not formally accountable to the Internet community.
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THE U.S. GOVERNMENT'S ROLE IN PROMOTING CHANGE

    On July 1, 1997, as part of the Administration's ''Framework for Global Electronic Commerce,'' President Clinton directed the Secretary of Commerce to privatize management of the domain name system in a manner that increases competition and promotes a contractually based self-regulatory regime to address potential conflicts between domain name usage and trademark laws on a global basis.

    Accordingly, on July 2, 1997, the Department of Commerce issued a Request for Comments (RFC) on DNS administration, on behalf of an interagency working group previously formed to explore the appropriate future role of the U.S. Government in the DNS. The RFC solicited public input on issues relating to the overall framework of the DNS system, the creation of new top-level domains, policies for registrars, and trademark issues. During the comment period, over 430 comments were received, amounting to some 1500 pages. That RFC was followed by a January 30, 1998, proposal for comments issued by NTIA, the ''Green Paper.'' Following the closure of the comment period, NTIA issued its Statement of Policy on the Management of Internet Names and Addresses (the White Paper). The White Paper called for the creation of a new, private, not-for-profit corporation responsible for coordinating specific DNS functions for the benefit of the Internet as a whole.

    In response to the White Paper, private sector participants in a world-wide forum created the Internet Corporation for Assigned Names and Numbers (ICANN). In late November of last year, just eight months ago, the Department of Commerce enterered into a Memorandum of Understanding with ICANN to collaborate on the design, development, and testing of the mechanisms and processes needed to transition DNS management to the private sector.
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TRADEMARK ISSUES

    ''Whois'' Database. The White Paper reflected most commenters' views that Internet users—including trademark holders—should have access to searchable databases of registered domain names that provide information necessary to contact a domain name registrant when a conflict arises between a trademark holder and a domain name holder. Specifically, the White Paper suggested that the following information should be available to anyone with access to the Internet:

 up-to-date registration and contact information;

 up-to-date and historical chain of registration information for the domain name;

 a mail address for service of process;

 the date of domain name registration;

 the date that any objection to the registration of the domain name is filed; and

 any other information determined by the new corporation to be reasonably necessary to resolve disputes between domain name registrants and trademark holders expeditiously.

    Cybersquatting. Cybersquatting is the abusive registration of domain names by bad faith actors who seek to capitalize on the goodwill earned by trademark owners by hijacking Internet addresses. Domain names of successful businesses may be manipulated by predators who claim rights to use the domain names of well-known brands to exploit the goodwill that businesses have spent considerable years and financial investment creating. The predators who engage in this practice generally do so in order to mislead consumers who think that they are accessing the website of a reputable establishment, or to extort payment from the rightful trademark owner for the right to use their own name in online commerce.
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    The Department condemns cybersquatting as a deceptive and unfair practice and as an impediment to the potential presented by electronic commerce. We are interested in protecting the public from the acts of people or entities that foster fraud and deny rightful trademark owners the chance to establish an easily accessible online address.

    For cyberspace to function as an effective commercial market, businesses must have confidence that their trademarks can be protected. On the other hand, management of the Internet must respond to the needs of the Internet community as a whole, and not trademark owners exclusively. Thus the White Paper recommended a transition that would maintain the rights trademark holders have in the physical world, ensure transparency, guarantee a dispute resolution mechanism with resort to a court system, and possibly add new top-level domains. Of course, all of this must occur during the transition to private sector coordination of domain names and at the same time that competition is being introduced into the provision of registration services.

    The White Paper suggested that the new management entity should adopt a number of specific policies designed to reduce domain name speculation involving another party's trademarks and, in general, to reduce conflict between domain name registrants and trademark owners. The recommended policies include:

  1) Domain registrants should pay registration fees at the time of registration or renewal and should agree to submit infringing domain names to the authority of a court of law in the jurisdiction in which the registry, registry database, registrar, or the ''A'' root servers are located.

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  2) Domain name registrants should agree, at the time of registration or renewal, that in cases involving cyberpiracy or cybersquatting (as opposed to conflicts between legitimate competing rights holders), they would submit to and be bound by alternative dispute resolution systems identified by the new corporation for the purpose of resolving those conflicts. Registries and registrars should be required to abide by decisions of the administrative dispute resolution (ADR) system.

  3) Domain name registrants should agree, at the time of registration or renewal, to abide by processes adopted by the new corporation that exclude, either pro-actively or retroactively, certain famous trademarks from being used as domain names (in one or more TLDs) except by the designated trademark holder.

  4) Nothing in the domain name registration agreement or in the operation of the new corporation should limit the rights that can be asserted by a domain name registrant or trademark owner under national laws.

    The White Paper referred a number of specific issues for further study by the World Intellectual Property Organization (WIPO). The White Paper suggested that mechanisms that allow for on-line dispute resolution could provide an inexpensive and efficient alternative to litigation for resolving disputes between trademark owners and domain name registrants. A swift dispute resolution process could provide for the temporary suspension of a domain name registration if an adversely affected trademark holder objects within a short time, e.g. 30 days, of the initial registration. The White Paper specifically recommended the dispute resolution process as an issue for study by WIPO.

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    The White Paper discussed the concern of trademark holders that domain name registrants in faraway places might infringe their rights with no convenient jurisdiction available in which the trademark owner could file suit to protect those rights. For example, at the time of registration, registrants could agree that, in the event of a trademark dispute involving the name registered, jurisdiction would lie where the registry is domiciled, where the registry database in maintained, or where the ''A'' root server is maintained. This issue of jurisdiction was also referred to WIPO for further study.

    Trademark holders have also called for the creation of some mechanism for ''clearing'' trademarks, especially famous marks, across a range of gTLDs. Such mechanisms could reduce trademark conflict associated with the addition of new gTLDs. This issue was also referred to WIPO for further study.

    The White Paper did not propose to establish a monolithic trademark dispute resolution process, but it did call for the establishment of minimum dispute resolution and other procedures related to trademark considerations. This issue was also referred to WIPO for study.

    The White paper also proposed that a study be undertaken on the effects of adding new gTLDs and related dispute resolution procedures on trademark and intellectual property right holders.

    WIPO completed its study of the issues referred to it by the White Paper on April 30, 1999. The process that produced the study included input from trademark and domain name holders and registries. The findings of this study were submitted to the board of ICANN and considered at its meeting in Berlin on May 25–27, 1999 (Berlin meeting).
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THE WIPO REPORT

    In response to the request of the United States and other governments around the world, the World Intellectual Property Organization conducted the study called for in the White Paper. The WIPO Final Report of the WIPO Internet Domain Name Process (Report), issued in April of this year, made a number of recommendations related to the trademark issues identified in the White Paper. Those recommendations start with a series of ''best practices'' for registration authorities. The adoption of improved standard practices will very likely reduce the problems that exist between trademark owners and domain name registrants.

    In particular, the collection and availability of accurate and reliable contact information for the domain name holder is essential if the system is to provide protection for trademarks. Contact details provide the principal means by which intellectual property owners can start the process to enforce their rights.

    The Report recommended that where the contact details were inaccurate or unreliable so that the trademark owner could not contact the domain name holder, then the trademark holder should have the right to serve notice on the responsible registrar. If the registrar then verifies that the domain name holder cannot be contacted, the registrar should be able to cancel the domain name.

    In addition, the Report listed the contact details that should be provided by the domain name applicants, e.g. name, postal address, e-mail address, voice telephone number, and fax number. The Report also recommended that such information be made readily available to the public.
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    As to the issue of an administrative dispute resolution procedure, the Report recommended to ICANN that 1) all new domain name holders be made subject to the dispute resolution process, 2) the scope of any administrative procedure be limited to cases of bad faith and abusive registration, 3) the determinations made in the process would be limited to orders to cancel or transfer the domain name and allocate the costs of the procedure, 4) decisions could be appealed to national courts, and 5) the administrative procedure be done online, as cheaply and quickly as would be consistent with safeguarding all of the rights involved.

    As to the possible exclusion from the domain space for famous or well-known trademarks, the WIPO Report recommended that a mechanism should be introduced whereby the owner of a well-known or famous mark could obtain an exclusion in some or all gTLDs for the mark if the mark is famous or well-known on a widespread geographical basis and across different classes of goods or services.

    Finally, the WIPO Report recommended that any new gTLDs be introduced in a slow and controlled manner, after introduction of new practices and in a manner that will allow the experience with the new gTLDs to be monitored and evaluated. ICANN referred the recommendations in the Report concerning new gTLDs to the Domain Name Supporting Organization (DNSO) for recommendations on the topic to be submitted to the ICANN Board as the earliest practicable time after the August 24–26 Board meeting.

ICANN ACTIVITIES

    On February 8, 1999, ICANN posted for public comment a set of guidelines to be followed in accrediting new registrars to provide registration services in the generic top level domains (gTLDs) of .com, .net, and .org. Although these so-called Accreditation Guidelines preceded the release of the final WIPO report in late April, ICANN anticipated and incorporated a number of its recommendations. Thus, by the time the Report was issued, ICANN had, for the most part, adopted the WIPO recommendations concerning best practices for registrars. ICANN has put into place some procedures to protect the privacy of domain name holders where requested.
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    ICANN embraced WIPO's call for an administrative dispute resolution procedure for cases of abusive registrations in violations of another party's intellectual property rights. The ICANN Board in May asked the DNSO to begin the work necessary to implement these recommendations, and to report back at the next ICANN meeting in late August. In the meanwhile, ICANN accredited registrars have been working to develop a voluntary, uniform dispute resolution policy that will incorporate the WIPO recommendations on cybersquatting.

    At its Berlin meeting in May, ICANN also referred the recommendations in the WIPO Report concerning exclusions for famous or well-known marks to the DNSO for further study and development.

CONCLUSION

    In the few short months that ICANN has been in existence, it has addressed a number of issues of significant concern to intellectual property owners. Of particular importance—to both the trademark community and the copyright community—is the obligation of all ICANN accredited registrars to collect and make publicly available reliable and up-to-date contact information for domain name registrants. This is backed up by a required provision in the registration contract between registrars and registrants that provides for termination of the registration in the event that the registrant fails to respond to an inquiry about the accuracy of any contact information. In addition, ICANN has taken the simple, but potentially very powerful, step of requiring pre-payment for domain names. If properly implemented, this policy should substantially reduce problems with cybersquatting.

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    ICANN's Domain Name Supporting Organization is working to develop procedures to implement the WIPO-recommended administrative dispute resolution procedure for cybersquatting. The DNSO is also expected to study further the recommendations related to famous marks as part of its work on possible new generic top-level domains.

    As new competitors begin to provide domain name registration services, we have every expectation that ICANN and the competing registrars will continue to be sensitive and responsive to the need of trademark holders to protect their intellectual property. The voluntary undertaking by ICANN accredited registrars to develop a uniform dispute resolution policy is a good indication of the ways in which the Internet community can come together to address important issues such as the protection of intellectual property rights in the domain name system.

    Thank you, Mr. Chairman. I would be happy to answer any questions the Committee may have.

    Mr. COBLE. Mr. Pincus, permit me to put a three-part question to you initially.

    First, in your opinion, who owns the intellectual property contained in the ''Whois'' database? Secondly, could Network Solutions unilaterally cut off public access to this database; and, if so, what would be the response of the Department of Commerce? And, finally, what is Commerce doing to ensure that there is guaranteed public access to accurate information in the database?

    Mr. PINCUS. Chairman, I don't want to elude your first question, but the question of ownership is a difficult and complex one. I think ultimately what we are very confident of is the answer to your second question, which is that NSI does not have, regardless of who has the technical ownership, and we think even with respect to that there is a very strong argument that we do, but we are quite confident that Network Solutions does not have the ability to cut off public access to the ''Whois'' database, a database that I have to add was developed when NSI was the exclusive registrar pursuant to a cooperative agreement with the government. So all of that information came into the system as NSI was operating pursuant to its cooperative agreement.
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    So our view is that that information can't be cut off. Indeed, the practice under the cooperative agreement for many years was that it was fully available to the Internet community, something that we recognized in the White Paper and urged that it continue. And access was only modified shortly before competition was to be introduced into the registrar business. So we have very strong views about that. We think that a cutoff would not be permitted under the cooperative agreement or any other existing law, and we have made that position very clear to NSI.

    Mr. COBLE. As the Department of Commerce relinquishes control over the registration of domain names, Mr. Pincus, how can this subcommittee be assured that ICANN, by its nature an international organization, will adequately protect American intellectual property rights? In effect, it is ceding control. Are we potentially damaging American IP interests?

    Mr. PINCUS. We think not, Mr. Chairman. Maybe I could briefly explain how we view the transition process as taking place. I think that will fully answer your question.

    Right now, as I mentioned, we have a Memorandum of Understanding with ICANN to develop this private sector management system which has never been done before. That Memorandum of Understanding requires ICANN to operate consistently with the policies that were laid out in the White Paper, one of which, as I mentioned, relates to recognition and protection of intellectual property interests. So those policies are now binding on ICANN.

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    We anticipate that if this project is successful and a private sector entity is developed that there would be a subsequent agreement that would, in effect, be the transitioning document and that that agreement would contain similar policy standards with which ICANN would have to comply. Obviously, a key element of that would be the intellectual property issues that we laid out in the White Paper.

    I should add that another protection is the fact that, as it is organized, intellectual property constituents are a key element of the ICANN process and have the ability to contribute in that way to the development of ICANN policies. So we really have two separate protections.

    Mr. COBLE. Let me try one more question before the red light illuminates in my eye.

    Mr. Pincus, recently your Department asked ICANN to delay the implementation of a $1 fee for domain name registration, a fee that is supported by many intellectual property organizations. Along this same vein, on what did your Department base its approval of a similar $9 fee, dare we say tax, charged by Network Solutions to new registrars for use of the master registry?

    Mr. PINCUS. Our view of the ICANN fee was not that it was illegal. It was just that before ICANN began to have a component of its board, which was elected, which will happen in November, we thought it was unwise to adopt a financing mechanism that had resulted in some controversy before there were elected members of the board who could participate in that decision. So our advice to ICANN was to eliminate the fee for now and really wait, put the decision of a permanent financing system on hold until there were some elected members of the board so the world and interested organizations could be clear that there had been full participation of the constituent groups in the development of that policy.
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    The $9 fee that you referred to is the fee that NSI is entitled to charge as registree for the service of taking competing registrars' registrations and putting them into the central database for ''.com'', ''.net'', and ''.org''. Our cooperative agreement with NSI anticipated that NSI would be able to charge a fee based on reasonable cost plus a reasonable profit with respect to that service that it would provide to competing registrars. That was the basis for the recognition of that charge.

    Mr. COBLE. Thank you, sir.

    The gentleman from California, Mr. Berman.

    Mr. BERMAN. Thank you, Mr. Chairman.

    The White Paper makes certain recommendations. To what extent do you view it as your role to push ICANN, to push the registrars to meet the terms of those recommendations?

    Mr. PINCUS. Congressman, we tried to strike a balance. We are trying to create private-sector leadership and a private-sector-led organization. So we do believe that, in the first instance, the development of policies and the development of a process for enforcing those policies should be in the hands of that organization. As I said however, we are now in a collaborative stage.

    With respect to the dollar fee, there is a point which we think it is appropriate for us to at least give advice to ICANN about what we think the appropriate course of proceeding will be.
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    So what I think we have tried to do is let the ICANN processes be created and worked but, at the same time, to watch them and certainly want to independently assure ourselves that they are compliant with the policies in the White Paper.

    Mr. BERMAN. Well, for instance, you recently sent a letter, I guess, to Network Solutions regarding I guess the way they decided to disable the Internet site and moved access to ''Whois'', to the Network Solutions site. That is an example I guess of Network Solutions not undertaking the policy which is contrary to fair competition in your minds. Are there other situations where Network Solutions who, as they move from the sole registrar to just one of a number, are taking actions without first consulting with the government or meeting the policies that you think are appropriate?

    Mr. PINCUS. We have discussed a number of those types of issues with NSI. One, as you mentioned, is the content and configuration of the Internet site.

    Another that we have discussed is the availability, as I mentioned in response to the chairman's question, the availability of who had access to the ''Whois'' database, both earlier this year when access to that database was conditioned on agreeing to a quick wrap, conditions which in our view were not appropriate and would disable even the use of that database for working against intellectual property piracy, among other purposes.

    Bulk access to the ''Whois'' database, bulk access to what are called the zone files, which are the files that are actually in the ''.com'' and ''.net'' and ''.org'' registries, as well as the basic issues that we are discussing with NSI which are ensuring that its operation of the registry, the central database, is under conditions and under supervision that assure that there will be competition and that its activities as a registrar competing with other registrars would be under the same conditions as those registrars so that we have a level playing field. And also under conditions that satisfy the policy concerns that we laid out in the White Paper with respect to intellectual property protection, among other things.
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    Mr. BERMAN. Well, will you be willing to slow the ICANN process down if it is necessary to assure that the appropriate agreements are reached, dispute resolution mechanisms are adopted, meaningful mechanisms are in place to protect intellectual property? Will you be willing to—I mean, can you give us some sense of how you will push ICANN to push to make sure those things happen?

    Mr. PINCUS. ICANN is in a difficult position. ICANN is trying to do two things at once. One is to get competition up and going, for which there is a great demand. The other is to get policies in place, including dispute resolution on other policies. It is under—my answer is yes. I, at least, have not heard from the intellectual property community the concern that right now the process is sort of moving along at a pace that requires it to be slowed down. ICANN has ensured that whatever dispute resolution procedures are adopted can apply to other registrars.

    Mr. BERMAN. My time is up. Just the example that I have heard and I think from your testimony about that, but one of the accredited registrars, CORE, sort of is denying public access to ''Whois'', making it very difficult, public access to ''Whois''. Isn't that an example of something that is happening that is in contradiction to the policies?

    Mr. PINCUS. Yes, and something that is very troubling to us. Ultimately, I am not sure that the whole process—in a case where an individual registrar is not complying with the accreditation agreement that they signed, which quite clearly would require a publicly accessible ''Whois'' database, then it would seem to me that that might be something that would be solved by dealing with that registrar, and maybe that registrar has to stop operating for a time if the problem has gotten so severe so that it can come into compliance with that requirement before more registrations are put into a system that no one has access to. But it obviously would be something that we would want to watch and take suggested action if it gets out of hand.
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    Mr. COBLE. I thank the gentleman. Since time permitted opening statements by only Mr. Berman and me, let me say to the other members of the subcommittee, if you want to submit written statements for the record, that will be in order.

    The gentleman from Virginia, Mr. Goodlatte.

    Mr. GOODLATTE. Thank you, Mr. Chairman, and I do have an opening statement that I would ask to be made part of the record.

    Mr. COBLE. Without objection.

    Mr. GOODLATTE. I want to thank you for holding this hearing on this very important issue.

    Mr. Pincus, welcome. We are pleased to have you here.

    Your Department has been criticized by some for putting the cart before the horse by pushing for the introduction of new registrars without first requiring each new registrar to have a dispute resolution procedure in place. Many are concerned that this lack of protection for intellectual property owners is creating a safe haven for cybersquatters and pirates. I wonder how you would respond to that criticism.

    Mr. PINCUS. We want to get a dispute resolution system in place as soon as we can. There has been tremendous pressure from many elements of the Internet community to have competition move ahead. Right now we are in the test bed period where we are testing the technology that has been developed to allow computer registrars to technically do their work. Our view—at least I personally have not heard from many people who have said this problem is so severe that we should stop and shut down competing registrars until it is solved. Obviously, it is something that we would like to happen as soon as possible.
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    On the other hand, the ICANN process is a consensus—is a process where policy is supposed to be developed based on consensus. So that is necessarily a somewhat time-consuming process. Unfortunately, ICANN has been criticized on the one hand for moving too swiftly and on the other hand too slowly. I don't know if that means they have got it just right, but I do think that reflects the tension that is inherent as we try to both move competition along and get the important policies in place.

    Mr. GOODLATTE. One is speed and the other is pressure. You can put more pressure on the folks who are moving swiftly which we want to have accomplished at the same time they are introducing competitive options for Internet users, also taking steps to make sure that we are fighting cybersquatting and piracy online at the same time.

    Mr. PINCUS. We are sensitive to that. My understanding is those registrars are talking among themselves and working hard to develop a policy, a uniform policy among themselves that they could then get up and running. We obviously want that process to go forward as quickly as it can.

    Mr. GOODLATTE. Is the Department of Commerce satisfied that ICANN is doing all it can to make sure that the new competitive registrars live up to obligations contained in the accreditation agreement?

    Mr. PINCUS. Again, that is an area where I think it is very important, especially with respect to the ''Whois'' responsibility and others, that ICANN be vigilant. My understanding is that ICANN is focused on those issues. We obviously stand ready to hear from people who think that it is not moving as swiftly as it can and more than willing to talk to ICANN about that and try to make sure that they are doing everything that they can to move that process forward.
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    Mr. GOODLATTE. I note that within your Department, NTIA, has taken a lead role in overseeing the policy issues involving domain name registration. Has the patent and trademark office, which obviously has an interest in this as well, have they been involved?

    Mr. PINCUS. The PTO has been intimately involved in all of the intellectual property issues relating to the domain name management system. They are the key people in the Department with respect to intellectual property issues, and their input is critical on those parts of the domain name system as we move forward. I think we have been very careful to make sure that they are involved in those discussions and that their input, as I said, is given very heavy weight.

    Mr. GOODLATTE. Do they have a formal role in process? Are they required to be notified of actions on ICANN, for example?

    Mr. PINCUS. We have a working group within the Department that is working on these issues; that has PTO people involved, NTIA people, and myself and people from the Technology Administration, for example, because of the technology issues involved. We don't have any formal system for notification. We could certainly set that up. I am not aware of a single intellectual property issue on which the PTO has not been intimately involved.

    Mr. GOODLATTE. Thank you, Mr. Chairman.

    Mr. COBLE. I thank the gentleman.
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    [The prepared statement of Mr. Goodlatte follows:]

PREPARED STATEMENT OF HON. BOB GOODLATTE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF VIRGINIA

    Mr. Chairman, I want to thank you for holding this timely and important hearing this morning. Over the past few years, we have seen the Internet explode into a revolutionary tool for business, communication, education, and commerce. Even so, the Internet is still in its infancy, and we are still struggling to determine how and when we should apply our existing laws to this new and growing medium.

    One area in which the Internet has forced us to reexamine current law is in the area of intellectual property protection. One flash point of this debate can be found in the registration of domain names. Domain names are commonly known words that are used to enable the public to access a website on the Internet without forcing them to remember the Internet Protocol Number of the site. Until recently, the assignment of domain names has been the sole responsibility of Network Solutions, Inc., a Virginia-based company that has a cooperative agreement with the National Science Foundation to assign domain names for the .com, .org, and .net generic Top Level Domains. These are by far the largest Top Level Domains, and most websites are assigned domain names under one of these three Top Level Domains.

    In the past few years registration of domain names has increased from several hundred per month in 1993 to a predicted one million in one month in 1999. While there were originally relatively few trademark disputes arising from the assignment of domain names by NSI, this explosion in registrations has been accompanied by an inevitable increase in the number of trademark disputes. Domain names are available from NSI, and now other registrars, on a first- come, first-serve basis. Although NSI has maintained a domain name dispute policy since 1995, it has been met with increased criticism in recent years.
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    This criticism led the United States government to ask the World Intellectual Property Organization (WIPO) to undertake a study of the issue and to propose recommendations for the resolution of this growing problem. Following extensive discussions, WIPO released its final recommendations on April 30, 1999. The WIPO report highlights two key areas that must be addressed in order to adequately protect intellectual property interests within the domain name system: 1) open access to contact information and the ''Whois'' database, and 2) the implementation of an improved administrative dispute resolution process for dealing with cybersquatters, or those who register famous domain names in the hope of selling them to companies that place a high value on them.

    These recommendations were made to ICANN, the newly formed, not-for-profit corporation established in 1998 to replace NSI as the entity responsible for administering policy for the exploding Internet name and address system. ICANN, or the Internet Corporation for Assigned Names and Numbers, was created in response to a proposal by the U.S. Department of Commerce to improve the technical management of Internet Names and Addresses. The Department of Commerce and ICANN signed an official memorandum of understanding on November 25, whereby Commerce and ICANN agreed to jointly design, develop, and test the mechanisms and procedures necessary to transition management responsibility for Domain Name registration functions to ICANN. Until the full transition is completed, the Department of Commerce remains responsible for monitoring the extent to which ICANN satisfies the principles of the White Paper as it makes critical registration decisions. While I have some concerns about the speed and manner in which ICANN is satisfying these principles, I look forward to hearing from our witnesses this morning, in particular from the Department of Commerce and from ICANN, as to whether they believe that adequate and timely progress is being made.
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    While the two issues of access to the ''Whois'' database and cybersquatting prevention present a significant challenge to the world intellectual property community and to ICANN, these issues have been further complicated by the transition to competition in the registration of domain names. Until now, NSI has maintained a single, authoritative ''Whois'' database. With the introduction of competition, NSI is providing only a registry-level ''Whois'' service that simply gives the domain name and the sponsoring registrar for all registrations in the .com, .net., and .org Top Level Domains. Individual registrars keep the contact information on their own registrants. The lack of a uniform, interconnected ''Whois'' service makes it more difficult to track down trademark and copyright violators. An additional problem has arisen concerning who owns the information in the current ''Whois'' database. NSI claims that it has proprietary rights to the contact information currently in the database. I look forward to hearing from NSI this morning as to the basis for this claim, as I strongly believe that intellectual property owners must have open and free access to this information. I firmly believe that a fully accessible, integrated, accurate ''Whois'' database is one of the most important tools for ensuring the effectiveness of both the NET Act and the online-service provider liability provisions of the WIPO implementing legislation passed last year, in order to prevent violations of trademark and copyright rights on the Internet.

    Finally, I look forward to hearing from our witnesses today about the WIPO recommendations to combat the practice of cybersquatting. I am interested in hearing whether our witnesses believe these recommendations are being implemented by ICANN in a timely fashion, whether they are adequate to effectively combat cybersquatting, and whether additional legislation is needed here in Congress to address areas not covered by WIPO in their recommendations.

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    I thank our witnesses for being here this morning, and I look forward to an interesting and informative hearing. Thank you.

    Mr. COBLE. The gentlelady from California, Ms. Lofgren.

    Ms. LOFGREN. Thank you, Mr. Chairman.

    I am enormously interested in this subject matter. I think it is a commentary on where we have come with the Internet, that a hearing of this nature would attract this many people, television coverage. A few short years ago you could have asked many Americans what is a domain name and you would have gotten a blank stare. We have come a long way, and there are many challenges that face us. And the decisions that we make here will really, I believe, affect the stage and affect the entire structure of the Internet well into the next century. So it is important that we react quickly but also very thoughtfully because missteps will haunt us for a considerable amount of time.

    Thinking about the database issue that has already been touched upon, there was an agreement between NSF and the company. What is specified in that agreement relative to the database? Can you tell us that?

    Mr. PINCUS. The agreement has a number of rights in data clauses. It also has a provision that we think is very significant which provides that at the end of the agreement all of the information and other data that has been gathered in the course of the agreement be turned over to NSF, now to the Department of Commerce, in a way that it would be possible for someone else to replicate the work that was done under the cooperative agreement. So, in our view, that is one of the things that makes it clear to us that, putting aside technical questions of ownership for the moment, there can really be no debate about the right of the public to access to the ''Whois'' type information. As I say, in the course of dealing, to me, especially when you have an agreement like this, is important in the course of dealing for a long period of time under the agreement was that this data was made freely available. To me, that is a very important indicator of how it should be interpreted.
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    Ms. LOFGREN. We are presently before the intellectual property subcommittee. A key issue is how intellectual property rights are maintained. I note the recommendation that there be alternative dispute resolution mechanisms. I think there is broad agreement that that make sense. But thinking not very far ahead, as we increase competition, and use multiple registrars and those registrars will not be limited to the United States. How we adopt uniform administrative dispute resolutions that reflect the intellectual property laws that we were elected to protect shall become ever more complex. How one structures ADR can also greatly affect the decision, that is, the outcome of the ADR.

    As I think about ICANN, I think ICANN makes a lot of sense in many ways in terms of not being too government driven. However, there is also the question of how we insert the public policy direction into ICANN and its structure, especially as to the exploitation of intellectual property. Do you have some thoughts on how we might achieve that, given ICANN's current structure, or whether we should review the structure with that in mind?

    Mr. PINCUS. That is one of the reasons that we called for the WIPO study, frankly. We are recognizing the global structure of the medium. We thought it was important to have an entity that has global expertise but has intellectual property concerns at its heart, really study these issues in depth and come forward with recommendations.

    As I said, we are very impressed both with the speed and thoroughness with which WIPO carried out that job. Those recommendations have a lot of substance in terms of how to structure the ADR process. We are hopeful that they will be speedily implemented by ICANN.

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    ICANN has a process of the domain name supporting organization looking at those with the directive to report back to the board in November, and we are looking forward to that report. I think that is one way to do it. As I said, ultimately, the way that we see to ensure that ICANN on an ongoing basis functions in a way that is consistent with proper public policy is in both the MOU and in our subsequent agreement with ICANN, if we get to that point, really making clear that the governing public policy principles that we have set out are ones that ICANN has to comply with on an ongoing basis.

    Ms. LOFGREN. Just in closing, you think WIPO answers this fully?

    Mr. PINCUS. I think WIPO has supplied a lot of—has really put the meat on the bones of the ADR process. I don't know that every detail is there, but a lot of it is there.

    Ms. LOFGREN. Thank you.

    Mr. COBLE. I thank the lady.

    The gentleman from Indiana, Mr. Pease.

    Mr. PEASE. Thank you, Mr. Chairman, and thank you, Mr. Pincus, for being here today.

    As we are looking into the future, it is going to be helpful for me to know a little bit more about where we are right now. In that regard, I would like for you to tell us a bit with how conflicts now between holders of trademarks and those who register a domain name, that is, the same words or same numbers of combinations as something that is already trademark protected, are resolved or not.
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    Mr. PINCUS. NSI has a dispute resolution system, although one that I think some have criticized. I don't think that it satisfies or has all of the ingredients that WIPO recommended, as it couldn't since it was developed before the WIPO recommendations. That is one venue.

    Another venue is the court system. There has been, as I am sure the subcommittee is aware, a number of court cases in the United States where mark owners have sought to rely on Federal law to enforce their rights and to prevent the registration or use of a domain name that infringes on those rights.

    Mr. PEASE. Can you tell us what has been the success in that endeavor?

    Mr. PINCUS. There has been a fairly good success rate on those issues. There was a recent Porsche decision that I think deals with it, the question of in rem and when a name is held but not actually in use. So anti-dilution and other claims can't be asserted, whether that is the kind of claim that has been asserted. It is a costly process and, obviously, I think one thing that marks owners would like, and we agree, that ADR would provide us a more efficient way to enforce those marks. Obviously, as we get more global there is a concern about jurisdiction. And that is one of the reasons why, as I say, although I think those cases, by and large, have been pretty successful, there is a need for an alternate way to provide for enforcement.

    Mr. PEASE. Is it your understanding that the state of the law on this subject is not in dispute, that mark protection includes use of names in this arena?
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    Mr. PINCUS. Yes. As I said, with the caveat that they have to actually be being used. Since one of the evils of cybersquatting is sometimes warehousing of names but not using the web site and the name, that is the one area where there is a bit of an issue.

    Mr. PEASE. Does the Department have any recommendations for changes in the trademark law on this subject or are you in the process of reviewing that?

    Mr. PINCUS. We are reviewing that issue. I think our preliminary conclusion is that, with the ADR process going forward and hopefully implementing soon, it is not clear to us that there is a need right now for changes in the law.

    We do have a bigger concern, as we do in many areas of Internet policy, that if we were to go ahead and enact an Internet-specific law then other countries who might make policy judgments different from us would do so and that might actually make the international situation worse. So to the extent that we can come up with a good and effective ADR system, that might be the best approach.

    Mr. PEASE. Thank you.

    Thank you, Mr. Chairman.

    Mr. COBLE. I thank the gentleman.

    The gentleman from Massachusetts, Mr. Delahunt.
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    Mr. DELAHUNT. Thank you, Mr. Chairman.

    I am pleased to hear that you are encouraged by the WIPO recommendations. Let me just follow that with another question. In terms of any recommendations by WIPO that would obviously have to be implemented by signatory governments through their parliaments, have you in any way evaluated the attitudes of parliaments elsewhere that would be engaged in this particular issue?

    Mr. PINCUS. I don't think that we have done—we really haven't looked into that. Our hope has been that much of what WIPO has recommended can be implemented through—it is directed at the registration process. So unless there is, as I say, some interference by other governments, by enacting, overlapping, or conflicting legal standards, we don't see that happening.

    Mr. DELAHUNT. You don't see that happening?

    Mr. PINCUS. We don't see that happening right now. My understanding is that the process has met, if not a claim, at least a lot of respect. I think that WIPO was able to generate a fair amount of consensus around its recommendations.

    Mr. DELAHUNT. I understand, Mr. Pincus, that Network Solutions has asserted ownership of the intellectual property rights to the material contained in the ''.com'' directory. Do you understand the legal basis for that assertion?

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    Mr. PINCUS. I think it rests on NSI's interpretation of some of the specific data rights clauses of the cooperative agreement and also NSI's more general conception of the cooperative agreement with which we disagree, which is that it was essentially an agreement to allow the private sector entity that manages ''.com'', ''.net'', and ''.org'' to get up and running. And at the termination of the cooperative agreement there is no further government supervision and oversight and no ability of the government to reassign these responsibilities elsewhere. It rests on both of those views with which we disagree, as we say.

    Mr. DELAHUNT. As you know, Mr. Pincus, this committee recently reported out a database protection bill which expressly excludes protection of such Internet-related collections of information. In view of the NSI claim, is it important in your opinion to pass this measure to preserve the public access to the directory?

    Mr. PINCUS. I think you are right, Congressman. Actually, I haven't thought about that, but I guess passage of something that excludes that would provide another basis, at least would make clear Congress's view that there is no protection there.

    Mr. DELAHUNT. Thank you. I yield back.

    Mr. COBLE. I thank the gentleman.

    The gentleman from California, Mr. Rogan.

    Mr. ROGAN. Mr. Chairman, thank you.

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    Mr. Pincus, good morning.

    Mr. PINCUS. Good morning, Congressman.

    Mr. ROGAN. I think one of Chairman Coble's first questions dealt with the ''Whois'' database, and that is the list of current owners of Internet domain names. The question the chairman posed was, who owns that, and I am afraid I didn't hear the answer.

    Mr. PINCUS. As I said in response to the chairman, our view is that it is a somewhat more difficult question. I think, ultimately, we would come to the conclusion that the government owns that, upon close examination. But we don't think that ownership is really the question that has to be resolved in terms of maintaining the access. That has been historically true up until earlier this year because we believe that the critical question is really whether the cooperative agreement allows the kind of termination of access that has happened. On that we are quite, quite clear, that, regardless of technical ownership, there is another question which is a use easement, if you will. I think we are quite clear that there is no basis for overriding that.

    Mr. ROGAN. But use easements are only relevant once ownership has been decided. I am unclear as to why that is a difficult question for the Department of Commerce to answer and why that you have such reticence in——

    Mr. PINCUS. I don't have reticence. I think in terms of the relative—the legal clarity of the two, as I say, ultimately, we think that we are right on both of them. But I think we have a very strong argument with respect to the use issues. So even assuming arguendo that we were to lose on ownership, we wouldn't want anyone to have the view that that was the issue on which access rose or fell, because we think this other argument is very powerful as well.
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    Mr. ROGAN. Thank you. I assume if ever down the road if the question of ownership came in doubt, the Department of Commerce would have no hesitancy to assert its rights on behalf of the United States in that regard?

    Mr. PINCUS. No. As we have made clear to NSI, both orally and in a letter that I sent to a chairman of NSI on Friday with respect to the new directory product they are offering, we feel very strongly about this issue both because of rights of the United States and also because of the competitive implications of NSI's current position.

    Mr. ROGAN. How was the ICANN board selected? They are, what, 19 members now?

    Mr. PINCUS. There are, I think, 18 members plus a chairman. There are nine now. Ultimately, there will be 18. The interim board has nine members.

    Mr. ROGAN. How are they selected?

    Mr. PINCUS. I have no personal knowledge about it. My understanding is that, as part of ICANN's application to be recognized as this not-for-profit corporation pursuant to the White Paper, the application included a list of the interim board members.

    Mr. ROGAN. Do you know how the ultimate 19 board will be selected?
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    Mr. PINCUS. Yes. There will be a two-step process. Nine members will be elected by the so-called supporting organizations, three each from the three constituency organizations that are part of ICANN. That is going to happen so that those individuals can be seated and on a time line so that they can be seated at the board meeting scheduled for November. The other nine elected members would be elected from an at-large membership through a process that ICANN is working on designing and on a time line to do that next year.

    Mr. ROGAN. This will be an international organization, not a domestic organization?

    Mr. PINCUS. It is a California corporation actually, but its constituency is and will be international, and indeed that was one of our criteria, given the international nature of the Internet and the pressure we were under from other parts of the world, to be sure that there was international input.

    Mr. ROGAN. Does the Department of Commerce have any concerns that we will be ceding incredible authority over regulating the Internet to an internationally based organization, rather than doing it domestically through the Department of Commerce or some other American institution?

    Mr. PINCUS. Our view was that the options that were available at the time, given that we thought privatization was the right way to go, was to have an organization that had international input but with which we had an agreement that would ensure that it would operate according to the policy principles that the United States Government felt were important.
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    As I said, we have done that in the MOU under which we are currently operating with ICANN, and we definitely intend to continue that kind of obligation on ICANN in whatever subsequent agreement we enter into that ultimately would transition. So transitions—I think responsibility would be transition, but subject to the policy conclusions that the United States Government feels are important in this area.

    Mr. ROGAN. Thank you.

    Mr. Chairman, I see my time has expired. I ask unanimous consent to also submit my opening statement for the record.

    Mr. COBLE. Without objection.

    [The prepared statement of Mr. Rogan follows:]

PREPARED STATEMENT OF HON. JAMES E. ROGAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Chairman, thank you for calling this hearing. In the past, Congress has been criticized for acting too fast, or indeed, too slow when responding to the changing needs of the technology community. Today, we have the opportunity to act promptly and effectively to ensure that the market for business development on the Internet and with Internet-related businesses remains healthy, competitive, and fair.

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    The basis of the Internet and electronic commerce is the domain name. As the distinguished gentleman from North Carolina noted, the number of domain name registrations has increased from about 100,000 to well over 7 million—just in the 4 short years I have spent in elected, public service.

    As the number of those both providing services and seeking their fortune in technology-based industries continues to rise, it is incumbent upon us to ensure both equity of access to registration services for entrepreneurs and corporations, and to foster a competitive marketplace.

    Mr. Chairman, this issue is of particular importance to my constituents. My district is home to Earthlink Networks, one of the top four Internet Service Providers in the nation. This company has grown exponentially in the last three years—benefitting both shareholders and members of the community who have found new jobs, new careers, and fresh opportunities.

    The core growth of Earthlink is based on providing one service: quality Internet access. This in turn, has paved the way for thousands of small businesses in my district to enter the growing world of electronic commerce. The integrity of these businesses is staked not just in the old paradigm of location, access and service. It is based in the new paradigm—under our jurisdiction—the integrity of their intellectual property: the domain name.

    Mr. Chairman, as we move forward today, we must balance the needs of consumers with the rights of business owners and ensure that growth and productivity from Internet-related businesses continue unhindered. We must also ensure that those, like ''cyber squatters'' who break the law, stand accountable under law.
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    The foundation of the Internet economy is the domain name. Intellectual property and the protection of domain names gives this committee a front row window into a rapidly growing economy. With this seat comes great responsibility, and I look forward working with both my colleagues on the committee, and experts in the field to craft sensible legislation to protect the intellectual property at the core of the Internet.

    I thank the Chairman for calling this hearing, and yield back the balance of my time.

    Mr. COBLE. The gentleman from Utah, Mr. Cannon.

    Mr. CANNON. Thank you, Mr. Chairman.

    Just following up momentarily on the question Mr. Rogan was asking, is it true that the majority of the members of the board currently are foreign nationals, not Americans?

    Mr. PINCUS. I am not sure. Let me ask one of my colleagues.

    Mr. Roberts will probably definitely be able to answer that question. I don't know. I am not sure of the nationality. Five U.S. And—five and five I am told.

    Mr. CANNON. We have 10 members, and half of those are not Americans. Thank you.

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    There has been a spate of publicity about registering obscene names on the Internet. It is my understanding that NSI had a policy of filtering those names which are obscene. You had five of the least agreeable of the words in our American lexicon. Then there are a couple of hate-based words that were precluded. Are you familiar with this issue?

    Mr. PINCUS. Yes, I know that NSI has had that policy, and NSI has been—there are a number of lawsuits involving it, and we have recently been joined in one of the lawsuits against NSI based on that policy, which I gather they have now rescinded.

    Mr. CANNON. Did they rescind it or did you and your Department influence the ability that they had as a private organization to filter out those words?

    Mr. PINCUS. No, we have quite carefully taken no position on it. I think we think registration of names containing those words is not a good thing, but we have been very cognizant of the first amendment limitations on the government's ability to direct—to control the use of certain words. So one of the things we have been careful about, and indeed NSI's line of defense in the cases in which this policy has been challenged, is to make clear it is not ''state action,'' it is not government directed, it is something that NSI did.

    Mr. CANNON. It is very important that it not be government directed. Haven't you been in the process of negotiating an agreement with NSI, and isn't it true that the language in that agreement allowed them to filter those words was removed by your Department? You or whoever in your Department was negotiating.

    Mr. PINCUS. I don't believe so. Certainly not knowingly. No one has ever told me before, either in the courts of negotiating with NSI or after, that something we did in one of our agreements affected their ability to do that.
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    Mr. CANNON. Have you been personally involved in the negotiation of those agreements?

    Mr. PINCUS. With NSI, yes.

    Mr. CANNON. Are you aware of the language that they have had that was a matter of concern in the agreement that they wanted to maintain which would allow them to filter words?

    Mr. PINCUS. I wasn't aware that anything that we were doing affected their ability to do so, and if they had brought it to my attention, I certainly would have done whatever I could to allow that to continue.

    Mr. CANNON. Are you the final say on what goes into that contract in your Department?

    Mr. PINCUS. We have a process—ultimately Secretary Daley has the final say on everything. We have a group of people, negotiating team, if you will, that includes, as I mentioned, people from various parts of the Department. But I was personally involved in those negotiations. I——

    Mr. CANNON. Secretary Daley would be the final word. But in the team negotiating it, are you the——

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    Mr. PINCUS. I am the senior person, yes.

    Mr. CANNON. And you are telling us now you were not aware or not made aware by NSI that certain language changes would preclude them from filtering these obscene and hateful words?

    Mr. PINCUS. No—let me just ask my colleagues, one of whom is here, who is also involved in those discussions. No, we were never told that.

    Mr. CANNON. Let me understand. From your point of view, it would have been important to leave in the private sector without governmental action the right for NSI to filter those words if that were possible, and you would have argued in the course of those negotiations to leave that right with NSI, if it had become clear to you that was what was at stake?

    Mr. PINCUS. If someone raised the issue, yes. The issue never came up, but we certainly had no intention of eliminating NSI's ability as a matter of its own decisions to decide what names to register, and if someone had said something we were doing in the contract negotiations would have done that, unless it would have had some other impact that I can't imagine, we obviously wouldn't have wanted to do that.

    Mr. CANNON. I don't know what the status of your negotiations is, but this matter is important, particularly the hate words. Are you familiar with what those two hate words were they were filtering?

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    Mr. PINCUS. I believe so, yes.

    Mr. CANNON. I see my time has expired unfortunately. May I just—thank you.

    Mr. COBLE. Go ahead. Did you have another question?

    Mr. CANNON. I have one quick question, and that is about Y2K compliance. Has the Department worked at all with the various organizations—through the root zone servers to see that the system is Y2K compliant?

    Mr. PINCUS. Let me just check with my colleagues. I believe the answer is yes.

    Mr. COBLE. Ma'am, you may join him at the table if you like.

    Mr. PINCUS. I don't know the answer to that, but I can get you the answer to that, Congressman.

    Mr. CANNON. I would appreciate a written response.

    Mr. COBLE. Folks, we will not have a formal second round of questions, but let's try an informal second round if there are additional questions.

    I have one more question. Oftentimes, Mr. Pincus, hypothetical questions can be loaded, and I don't intend for this one to be loaded.
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    Let us assume NSI refuses to sign on with ICANN and abide by the accreditation requirements. Will the Department of Commerce cancel the cooperative agreement with NSI to ''encourage'' them to live under ICANN, and what if anything can this subcommittee do to assist by maybe clarifying the law regarding ownership of the ''Whois'' database?

    Mr. PINCUS. Mr. Chairman, we have been very clear that our preferred course and one that we have every reason to believe we will be able to realize is to reach an amicable resolution of the outstanding issues with NSI and move forward on all the issues that I outlined in response to Congressman Berman's question.

    On the other hand, if that is not possible, we believe that our obligation to the public is to take appropriate steps to move toward competition, and in our view the appropriate step would be to recompete the responsibility for managing the registry, the central database, and award the responsibility for performing that function to whomever wins that recompetition.

    Obviously, NSI has a different view, and a lot of lawyers would probably make a lot of money, at least on the non-government side, if we took that course. But we think that would be our only choice if we were forced to go down that road.

    Mr. COBLE. Thank you, sir.

    Mr. Berman or anybody have additional questions? Ms. Lofgren

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    Ms. LOFGREN. Just really quickly getting into the whole issue of how one enforces or encourages or arrives at uniformity, which I was trying to get at in my first round. ICANN will be encouraging registrars to develop models and then that will be voluntarily adopted in terms of alternative dispute resolution. But I am thinking ahead to a year from now. There will be competition, there is no question. There is competition now, there will be more competition, and I am thinking how do we avoid sort of the tax-haven phenomena, the registrar shopping by those who really are not interested in avoiding abusive registrations or dispute resolutions that don't call them to generally acknowledged world standards for IP? What are our thoughts about enforcing uniformity, or is that impossible to do?

    Even thinking about this, ICANN is charging a fee now, NSI is not. People who are just interested in the small impediment, that will—you know, the Internet is like water. It flows where it is easy to go.

    Mr. PINCUS. Well, with respect to the newly accredited registrars, putting NSI to the side for a moment, ICANN has the contractual authority to, once a dispute resolution is developed through its processes, which is now going on, consideration and sort of finalization after the WIPO recommendations, it can require all of the accredited registrars to follow that ADR system. With respect to those registrars, there is really no problem. They can be bound to whatever detailed system is developed pursuant to the WIPO recommendations.

    With respect to NSI, as we said, since they are not operating pursuant to an agreement with ICANN right now, there is a different story. The answer I gave to the chairman I guess applies to this as well. Ultimately, we have to—we hope we can reach the point where they will, and therefore NSI will implement the very same ADR system that bubbles up through the ICANN process and signed onto by the other registrars. If that doesn't happen and we can't reach an agreement toward that result, then we will have to look toward a recompeting of the cooperative agreement and reassigning of those functions in order to make sure that there is competition among registrars on a level playing field, and also that all of those competing registrars have the right and appropriate protections for intellectual property.
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    Ms. LOFGREN. You are saying ICANN is going to hold all of the cards in terms of controlling route. That gets us into the question of the stability of the Internet. We are interested in intellectual property, but we ought not to overlook this.

    Mr. PINCUS. That is why we hope all of these issues can be resolved amicably. Obviously, if we get into a fight, there are all kinds of concerns ultimately about the stability of the Internet that we think we have to do everything to avoid, and we have every hope we will avoid. But, ultimately, it is not only control of the route, it is our view that the cooperative agreement—that the United States retains authority to decide who can register a name in .com, not .org and .net, both by virtue of the cooperative agreement and by the government's control over the route.

    Ms. LOFGREN. Thank you, Mr. Chairman.

    Mr. COBLE. Mr. Rogan, do you have a second question?

    Mr. ROGAN. Mr. Chairman, thank you.

    Mr. Pincus, when you talk about an alternative dispute resolution, the system down the road, are you working within any conceptual framework as to how that would be organized? Would that be an international court, if you know, or be domestically based?

    Mr. PINCUS. I think it will have to be somewhat internationally based, because a number of the registrars are not domestic. So at least we have to have an ADR system that can be used around the world, although because a lot of this can be done on line, the actual place where it is located is not necessarily determinative.
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    But I think what we are looking toward is the WIPO recommendations on this issue, which laid out in some detail how an ADR system might be structured, and I think we have generally supported the outcome of that process, as has I think most of the intellectual property community. So we see that as a good basis for moving forward to finalize the details of the system.

    Mr. ROGAN. Will there be any protection in place or will there be any process in place so that down the road we will not have to be concerned that perhaps some internationalist board members who don't share our same intellectual property appreciation would use their position to start imposing onerous regulations on the Internet, such as taxes and fees as they have attempted to do in the past, with that $1 tax, if you will? I know they have made some systemic changes. They were under a lot of criticism, meeting in secret, imposing fees. There didn't appear to be any accountability. That is where my concern is with the structure of ICANN as of this date.

    Mr. PINCUS. As you know, Congressman, we were concerned about some of those things as well, and we urged ICANN to take a number of steps to respond to criticisms, including putting off the question of fund-raising, opening board meetings. We think it is important for ICANN to include in its contractual agreements and its bylaws, and we would certainly include in our agreements with ICANN, a specification of exactly what ICANN's function is, because ICANN's function really is to make the decisions that are necessary to allow the domain name system to function. It is actually a limited sphere, and we think making that clear, and if you will, delineating clearly what the area of competence is, is another way to protect against some possibility that in the future if something might happen that would lead ICANN to do things that none of us would want. So that is another protection that we think is important to put in place.
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    In addition, as I mentioned in the current MOU and subsequent agreements with ICANN, we are going to make sure that both procedural guarantees are in place and substantive guarantees are in place to ensure that ICANN has an obligation to the U.S. Government to function in a manner that is consistent with the policies that we laid out in the White Paper.

    Mr. ROGAN. Is it fair to conclude that that limited sphere of which you just spoke was initially contemplated for ICANN's role and then they moved beyond that limited sphere and started operating on a much broader policy level?

    Mr. PINCUS. I am not sure. I think I agree with you that the limited sphere was contemplated, and it is something we have been clear on from the very beginning. ICANN is not a broad Internet governance organization. It is to focus with a laser on the domain name management system.

    They have been criticized for moving beyond it, I think. Some of the things, like the fee, again, we think that was not an appropriate decision until there is an elected board. Ultimately, there has to be some way of financing the organization. So the area of financing doesn't seem like something that was completely beyond the pale, although, as I said, it seems to us something that had to be done, should not have been done until there were elected board members who could make it clear that the constituents were being properly represented by the boards.

    Mr. ROGAN. Thank you, Mr. Chairman.

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    Mr. COBLE. The gentleman from Massachusetts.

    Mr. DELAHUNT. How is ICANN currently being financed, Mr. Pincus?

    Mr. PINCUS. ICANN is currently being financed on donations from——

    Mr. DELAHUNT. Who are the donors?

    Mr. PINCUS. I believe Mr. Roberts can speak to this with more specificity.

    I think a number of companies who are concerned about the future of the Internet have donated money to keep ICANN afloat. I think they have a substantial negative net worth right now, and, ultimately, of course, they have to finance themselves somehow. But given the fact that half the boards will be elected shortly, we think that is a decision they should make at that time. We have said we will do anything we can within the law to help them through this period.

    Mr. DELAHUNT. In response to a question by the chairman, I would just make the recommendation in terms of the role of this particular committee, given the potential tension between the protection of intellectual property rights and the growth of the Internet, that this particular issue, this discrete issue, clearly warrants the exercise of frequent oversight hearings by this subcommittee.
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    Mr. PINCUS. We would be happy and eager to have that opportunity for dialogue as this moves forward.

    Mr. COBLE. I thank the gentleman.

    The gentleman from Utah, Mr. Cannon.

    Mr. CANNON. Thank you, Mr. Chairman. A couple of questions only.

    Mr. Pincus, is the Department's position that the authoritative root zone server should remain in the U.S.?

    Mr. PINCUS. Yes.

    Mr. CANNON. Do you have some ability to actually control that in the relationship with ICANN?

    Mr. PINCUS. ICANN right now, the authoritative route server is not under the control of ICANN. We believe it is quite clear the government has control over that. It is being managed by NSI now pursuant to an agreement that we have with them. But we think it is crystal clear that the government has control over the authoritative route server.

    Mr. CANNON. And the government means, at this point, your Department?
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    Mr. PINCUS. Yes, the Commerce Department.

    Mr. CANNON. Mr. Chairman, you were kind enough to suggest that one of Mr. Pincus's staffers join him at the desk. I am actually deeply troubled by this transition in obscenity or the allowing of obscene and hate-based words that have been filtered out by NSI. I was wondering if the Chair would indulge Mr. Pincus by allowing him to have whichever staffer understands this issue best join him so I could ask a couple of questions.

    Mr. COBLE. Without objection, fine.

    Mr. PINCUS. Becky Burr with NTIA is here. I think she has one additional fact to add.

    Mr. COBLE. Ma'am, if you will for the record identify yourself and your title.

    Ms. BURR. My name is Becky Burr. I am the Acting Associate Administrator of NTIA.

    Mr. COBLE. Mr. Cannon will now examine you, Ms. Burr.

    Mr. CANNON. I appreciate your coming to the table, Ms. Burr. Are you aware of what the transition in the contract between the Department and NSI was that resulted in at least others who register through them having the ability to use—get around the mechanism that filtered obscene words from the Internet?
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    Ms. BURR. I don't have the NSI registrar and license agreement in front of me, so I haven't been able to review it. There are some provisions in that that really relate to not using the Lanham Act as a basis for not registering names, I believe. That is the only thing I can think of that relates to the questions you are raising.

    Mr. CANNON. Did the Department take a position that required a change in the language in those agreements that resulted in allowing these names to be unfiltered and to go on as domain names?

    Mr. PINCUS. I think I have an idea of what you may be getting at. Maybe I can—I think the agreement you are referring to is the agreement that we had to approve. It is the agreement between NSI and the competing registrars which licenses the NSI-developed software which they have to use to submit registrations to the database.

    I don't recall in connection with that agreement any discussion of this issue. I think I would have, and I think we would have been sensitive to it. I know that I was in all of the discussions.

    We did have a sort of a structural debate with NSI, and maybe this is what you are referring to. It was NSI's position at the onset of those discussions that NSI's—ICANN should not have a direct relationship with the competing registrars and that those registrars should be required—the way they would be required to comply with ICANN policies on issues such as what has to be in a ''Whois'' database to make sure it is useful for intellectual property owners would occur by ICANN contracting with NSI and then NSI sort of flowing through those requirements to the competing registrars.
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    It may be, although this was not mentioned, that some have the view that, if that happened, NSI might have been able to, in that agreement, have some provision relating to this question.

    As I say, this issue didn't come up. If it had come up specifically, we could have addressed it. If the way it was raised was in this—as part of this—if it was raised implicitly by this sort of structural question, we had great concerns, public policy concerns, with the structure that would interpose NSI between ICANN and the competing registrars. We just thought as a matter of public policy and especially competition policy that was not a good structure and not one that we could sign on to.

    But as I say, even in those discussions, this particular issue never came up.

    Ms. BURR. It is quite clear, however, in all of the agreements that any registrar is entitled to have a policy that limits their ability—limits what names they will register.

    Mr. CANNON. NSI continues to use their filter.

    Ms. BURR. I gather NSI has dropped their filter.

    Mr. PINCUS. They have unilaterally dropped their filter.

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    Mr. CANNON. They have dropped their filter. Is that their filter of other names they are registering or is that names they themselves register?

    Mr. PINCUS. The names they themselves register. They have unilaterally—as I understand it from reading press accounts, they have decided to rescind their policy broad ban to the registration of the names containing the words you are referring to.

    Mr. CANNON. I ask unanimous consent for one additional minute.

    NSI does two things, as I understand it. They register names in .com and .org and .net. Are they at this point registering obscene names and not using their filter for those three extensions, to your understanding?

    Mr. PINCUS. That is my understanding, just from reading articles in the paper. I haven't talked to them about it.

    Mr. CANNON. As opposed to registering names from others who have announced they are going to allow those obscene words?

    Mr. PINCUS. That is my understanding.

    Mr. CANNON. That is something NSI will want to clarify when they come up.

    Thank you, Mr. Chairman.
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    Mr. COBLE. I thank the gentleman and lady for joining us. Mr. Pincus, I get the distinct feeling we will be in touch.

    Mr. PINCUS. It will be a pleasure, Mr. Chairman.

    Mr. COBLE. Good to have you with us.

    I will ask the second panel to come forward.

    I am going to give the introduction to the second panel. It will be somewhat extended, but I think it is significant that you all know the background and the credentials that these people bring to the table. So in the order of the name that I call, please come forward.

    Our first witness on the second panel today will be Mr. Francis Gurry, the Assistant Director General and Legal Counsel of the World Intellectual Property Organization, WIPO, in Geneva. Mr. Gurry is responsible for WIPO's activities in the field of electronic commerce and the WIPO arbitration and mediation center, as well as for international legal and constitutional questions and the organization's relations with industry.

    Mr. Gurry, we are taking on an international flavor today. You get the prize for having traveled the greatest distance to be here. We also have a witness who came to us from our neighbor to the north in Canada.

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    Our next witness is Mr. Michael Roberts, who is the Interim President and CEO at Internet Corporation for Assigned Names and Numbers, ICANN. Mr. Roberts is a policy consultant in the field of Internet technology services and product development with a specialization in research and education. He recently retired as vice president at EDUCOM, a consortium of 600 universities and colleges with interests in information technology, where he was responsible for networking and telecommunication programs, including the development of public policy positions and information technology on behalf of EDUCOM members.

    Our next witness is Mr. Michael A. Daniels, who has 25 years of business management experience in high-technology industries. Mr. Daniels serves as Chairman of the Board at Network Solutions, Inc., NSI. In addition to his leadership at Network Solutions, Inc., Mr. Daniels serves as secretary-vice president of Science Applications International Corporation, SAIC, a $5 billion high-technology firm. He is also SAIC's senior manager for global Internet business strategy.

    Mr. Daniels is joined today by Mr. Philip Sbarbaro, Network Solutions' outside chief litigation counsel.

    Our next witness is Mr. Jonathan C. Cohen, who is President of the Intellectual Property Constituency of the Domain Name Supporting Organization, DNSO. He is also a senior managing partner of the Shapiro Cohen Group of Intellectual Property Practices located in Ottawa. Good to have you with us.

    Mr. Ken Stubbs, our next witness, is Chairman of the Executive Committee of the Internet Council of Registrars, CORE. Mr. Stubbs has 24 years' experience in specialized business consulting services. He has served as web presence consultant since 1994, with Internet experience centering primarily on commercial use.
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    Ms. Kathlene Karg, who is the Director of Intellectual Property and Public Policy for Interactive Digital Software Association, is our next witness and is here today on behalf of the Copyright Coalition on Domain Names, an organization representing copyright owners in music, sound recordings, audio-visual materials, and text products, in addition to software. Formed in 1994, the Interactive Digital Software Association is the only United States' association exclusively dedicated to serving the business and public affairs interests of companies that publish video and computer games for video game consoles.

    Ms. Karg oversees the development and implementation of anti-piracy programs for the international markets, the United States' market and the on-line market, develops policy for intellectual property and other matters, such as electronic commerce, and trains United States and foreign law enforcement personnel on how to properly enforce intellectual property rights.

    Our next witness is Mr. Mike Kirk, who is the Executive Director of the American Intellectual Property Law Association. Mr. Kirk served as the Deputy Assistant Secretary of Commerce and Deputy Commissioner of Patents and Trademarks from May, 1994, through March, 1995. In 1993, Mr. Kirk also served as the Acting Assistant Secretary of Commerce and Acting Commissioner of Patents and Trademarks.

    Our final witness today is Ms. Anne Chasser, who is the Director of the Office of Trademark and Licensing services at the Ohio State University. She is testifying on behalf of the International Trademark Association as its President. She is a recognized expert in trademarks and collegiate trademark licensing and manager of the commercial use of positioning of university trademarks.
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    Ms. Chasser earned her Bachelor of Arts degree from the University of Dayton and her MA from the Ohio State University. It sounds as though you are a thoroughbred Buckeye, Ms. Chasser. I am also pleased to indicate, for the benefit of the uninformed, that Ms. Chasser has been nominated to be the new Commissioner of Trademarks; and we would like to extend congratulations to you upon your nomination, Ms. Chasser.

    Folks, again, if you all will comply with our request, we do try to operate within the 5-minute rule. Now, each of you has submitted written testimony. That testimony has been examined, and it will be examined subsequently, I assure you, so nobody is taking you all at short shrift. But in the interests of time, I do think that we need to stay within the 5-minute rule and your warning will be the red light.

    Mr. COBLE. Mr. Gurry, we will begin with you, sir.

STATEMENT OF FRANCIS GURRY, ASSISTANT DIRECTOR GENERAL AND LEGAL COUNSEL, WORLD INTELLECTUAL PROPERTY ORGANIZATION (WIPO)

    Mr. GURRY. Thank you, Mr. Chairman.

    Mr. Chairman, members of the committee, thank you for the privilege of being able to testify——

    Mr. COBLE. Mr. Gurry, pull that a little closer to you. I am not sure your mike is turned on.
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    Mr. GURRY. I think there are limits, Mr. Chairman, to this cord.

    Mr. Chairman, the World Intellectual Property Organization is an international intergovernmental organization with 171 member States. It is charged with the mission of the promotion and protection of intellectual property internationally. It does this through the administration of a number of multilateral treaties. Under certain of these, the Organization provides direct services to the private sector. The United States' private sector is the largest and preeminent user of the services of the Organization.

    It was a privilege for the Organization to be requested by the United States Government to undertake an international process to develop recommendations on certain questions concerning the interface between intellectual property rights and domain names. We undertook extensive international consultations in that process, including 17 meetings in 15 countries.

    The report of the process, which was published on April 30, Mr. Chairman, contained recommendations in four areas. Two of those areas we believe are critical, since they are of immediate operational significance. If I may, I will make a few remarks just on those two areas.

    The first area is registration practices and, in particular, the key recommendation that the Organization made in this area, that a fundamental precondition for the enforcement of intellectual property rights was the availability and public accessibility of accurate and reliable contact details of domain name holders.
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    We recommended that it not only be a requirement that domain name applicants provide accurate and reliable contact details, but also that an enforcement mechanism should be implemented whereby a domain name registration would be canceled in the event of the service of the notification upon the registrar that the contact details were not reliable and accurate, and in the event also of the independent verification of that unreliability.

    The second area of concern is a uniform dispute resolution procedure. We believe the approach in our report on this matter was a minimalist approach, that is, that we addressed only the most egregious problem that exists, namely, the bad-faith, deliberate, abusive registration and use of domain names in violation of trademark rights. We believe that uniformity in this dispute-resolution procedure is a key element in the successful protection of intellectual property rights. Since registration services will be spread around the world on a wide geographical basis, if a uniform procedure is not implemented, then there is a possibility of havens of intellectual property infringements developing.

    The ICANN Board at its meeting in Berlin in May, Mr. Chairman, adopted a two-track process in relation to our recommendations on a uniform dispute-resolution procedure.

    The first was to submit those recommendations to its domain name supporting organization for its recommendations ICANN resumes its meeting in August of this year.

    The second was to encourage its registrars to adopt voluntarily a uniform dispute-resolution procedure.

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    Yesterday, Mr. Chairman, WIPO facilitated, at the request of a number of the testbed registrars, a meeting designed to achieve uniformity consistent with the WIPO recommendations in a dispute resolution policy to be voluntarily by the testbed registrars. It was attended by three of the five testbed registrars, as well as 10 of the post-testbed registrars, and by Network Solutions, and we believe that we are on the track toward the possibility of implementation voluntarily, by at least some of the registrars, of a uniform dispute resolution policy consistent with the recommendations in our report at some stage in the month of August.

    Thank you, Mr. Chairman.

    Mr. COBLE. I thank you, sir.

    [The prepared statement of Mr. Gurry follows:]

PREPARED STATEMENT OF FRANCIS GURRY, ASSISTANT DIRECTOR GENERAL AND LEGAL COUNSEL, WORLD INTELLECTUAL PROPERTY ORGANIZATION (WIPO)

SUMMARY

    The WIPO Internet Domain Name Process was conducted at the request of the United States Government and with the approval of the 171 Member States of WIPO. It involved extensive consultations with the public and private sectors, conducted through a website established for the Process (http://wipo2.wipo.int) and through 17 physical meetings held in 15 ountries and five continents. The Process culminated in the publication of a Report on April 30, 1999, which was transmitted, as mandated, to the Board of the Internet Corporation for Assigned Names and Numbers (ICANN).
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    The WIPO Report made recommendations on:

(i)

  improved registration practices to reduce the tension between, on the one hand, the privately administered and globally accessible domain name system (DNS) and, on the other hand, the publicly administered and territorially based intellectual property rights system;

(ii)

  a uniform dispute-resolution policy for adoption in the generic top-level domains (gTLDs), the scope of which would be limited to complaints of the bad faith registration of domain names in abuse of trademark rights;

(iii)

  the introduction of a mechanism for granting exclusions in respect of marks that are famous across a widespread geographical area and across various classes of goods and services;

(iv)

  the impact on intellectual property of adding new gTLDs.

    The Governmental Advisory Committee of ICANN, at its meeting in Berlin on May 5, 999, endorsed the WIPO Report and recommended to the ICANN Board that it put in place the means for making data on domain name registrations available and report on the implementation of the uniform dispute-resolution policy by its next meeting in August 1999. It also advised that the WIPO recommendations on famous marks and the impact of new gTLDs be referred to the ICANN Domain Name Supporting Organization (DNSO) for consideration.
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    The ICANN Board, at its meeting in Berlin on May 27, 1999, noted that ''most of'' the WIPO recommendations on registration practices had been adopted in the ICANN Statement of Registrar Accreditation Policy. It referred the WIPO recommendations on a uniform dispute-resolution policy to the DNSO for its recommendations by July 31, 1999, and scheduled subsequent action, on the basis of the DNSO's recommendations and any other public comment, for its Board meeting in August. The Board referred the WIPO recommendations on famous marks and the impact of new gTLDs to the DNSO to report back after the its August meeting.

    Two areas are critical at the moment: the availability of accurate and reliable contact details of domain name registrants (dealt with in the WIPO recommendations on registration practices) and a uniform dispute-resolution policy. They are critical because they represent the minimum means for achieving the respect of intellectual property in the DNS and because ICANN has accredited five testbed registrars and 52 post-testbed registrars to participate in the Shared Registry System for .com, .net and .org. The testbed registrars have also been asked by ICANN to work toward the voluntary adoption of a uniform dispute-resolution policy.

    The multiple tracks initiated in respect of a uniform dispute-resolution policy (the WIPO Report, the DNSO's deliberations and the encouragement of testbed registrars to adopt voluntarily a policy) carry the risk that the opportunity to achieve a workable, uniform dispute-resolution policy for the prevention of abusive registrations may be endangered.

STATEMENT

    Mr. Chairman and Members of the Committee,
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    Thank you for this opportunity to present the results of the WIPO Internet Domain Name Process and some observations on the current situation with regard to the implementation of those results.

Mandate

    The mandate for the involvement of the World Intellectual Property Organization (WIPO) in the process of the transition of the technical management of the domain name system (DNS) to a private corporation came originally from the USG White Paper of June 5, 1998,(see footnote 1) which contained the following passage:

''The U.S. Government will seek international support to call upon the World Intellectual Property Organization (WIPO) to initiate a balanced and transparent process, which includes the participation of trademark holders and members of the Internet community who are not trademark holders, to (1) develop recommendations for a uniform approach to resolving trademark/domain name disputes involving cyberpiracy (as opposed to conflicts between trademark holders with legitimate competing rights), (2) recommend a process for protecting famous trademarks in the generic top level domains, and (3) evaluate the effects, based on studies conducted by independent organizations, such as the National Research Council of the National Academy of Sciences, of adding new gTLDs and related dispute resolution procedures on trademark and intellectual property holders. These findings and recommendations could be submitted to the board of the new corporation for its consideration in conjunction with its development of registry and registrar policy and the creation and introduction of new gTLDs.''
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(Emphasis added)

    The international support which the White Paper indicated that the U.S. Government would seek for the role of WIPO was manifested at the annual meeting of the Member States of WIPO, of which there are 171, in September 1998. At that meeting, the WIPO General Assembly endorsed the mandate and approved the undertaking of an international process designed to make the recommendations and to establish the findings called for in the White Paper.

The Process Undertaken by WIPO

    The Process that WIPO conducted in response to the mandate conferred upon it was both intensive and extensive.

    It was intensive insofar as an endeavor was made to undertake and complete the Process within a very short timeframe. The Process was completed within nine months, the final report being published on April 30, 1999. This timeframe, it was considered, was necessitated both by the urgency of the problems being addressed, which were leading to a wasteful diversion of resources on the part of owners of intellectual property rights, and by the need to have available the results of the Process in time for the proposed introduction of competition in the provision of registration services in the generic top-level domains, .com, .net and .org.

    The Process was extensive insofar as an endeavor was made to involve the widest cross-section of persons and entities interested in the administration of the DNS across the widest geographical area. To this end:
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 a website (http://wipo2.wipo.int) was established for the Process and made available in three languages (English, French and Spanish); a total of 1,358 persons and organizations from 74 countries registered on the website to receive communications concerning developments in the Process;

 17 open meetings were held in 15 countries and five continents, which were attended by 1,264 participants; three of those meetings were held in the U.S.A., two in Washington D.C. and one in San Francisco; the full audio and text records of all of the meetings were published and made available on the Process website;

 an unmoderated listserver, to which 420 persons subscribed, was established to facilitate the free discussion of the issues under consideration in the Process;

 three Requests for Comments (RFCs) were issued in three languages, the first directed at the further definition of the issues specified in the original mandate, the second seeking substantive comments on those issues, and the third consisting of an interim report;

 in all, comments on the RFCs and formal presentations at the open meetings were made by

— 40 governments

— 4 international organizations

— 74 professional, industrial and academic organizations
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— 181 corporations and law firms

— 183 individuals.

The General Approach Adopted in the Report of the Process

    In making the recommendations contained in the Report of the WIPO Process, three factors, in particular, were borne in mind as indispensable guides to the acceptability of the recommendations:

(i)

  First, it was considered essential that the recommendations be technology neutral, that is, that the recommendations should in no way condition the future development possibilities of the technology underlying the Internet.

(ii)

  Secondly, it was considered equally essential that the recommendations should, insofar as possible, respect the current strengths of the DNS as a robust, efficient, cheap and easy means of obtaining a presence on the Internet.

(iii)

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  Thirdly, it was considered to be of great importance that the recommendations be sensitive to the general policy aim of restricting any regulation of activity on the Internet to those areas where regulation is necessary in the interests of vindicating public policies that are well established and unquestioned on the national and international level.

    Because of these factors, in particular, the WIPO Report adopts a minimalist approach to the issues that were addressed in the WIPO Process. The recommendations of the Report deal only with the most urgent and most obvious problems, while recognizing that other problems and issues exist that might usefully, in the course of time and with the benefit of experience gained form the implementation of the recommendations of the Report, also be addressed.

The Main Recommendations and Findings of the WIPO Report

    The WIPO Report found ample evidence that a significant problem exists as a result of the intersection of, on the one hand, the largely privately administered and globally accessible domain name system and, on the other hand, the publicly administered and territorially based intellectual property rights system. The most egregious manifestation of this problem is the exploitation in bad faith of the ease and simplicity of obtaining a domain name registration in order to register, as a domain name, the trademark of another person with a view to extracting a premium from the owner of the mark. Significantly, throughout the whole of the WIPO Process, not one voice defended this practice, which is known commonly as cybersquatting. The practice was universally condemned.

    The main recommendations made in the WIPO Report in order to address the problems arising out of the intersection the DNS and the intellectual property rights system are:
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(i)

  It was recommended that improved registration practices be introduced as a means of reducing tension between the DNS and the intellectual property rights system. The recommendations in respect of such practices did not suggest any radical modification to the present simple, efficient and cost-effective system for registering domain names, which was recognized as deserving credit for facilitating the rapid expansion of the Internet. Thus, for example, it was not recommended that registrars should be required to undertake pre-registration checks of prospective domain names against trademark databases, as such a measure would increase significantly the time and cost of obtaining a domain name registration. Rather, the recommendations in relation to registration practices represent minimum standards of good practice which, if adopted, are likely to reduce considerably the possibility of the bad faith abuse of intellectual property rights through domain name registrations.

(ii)

  To deal with the most obvious and recurrent type of conflict between domain names and intellectual property rights, it was recommended that a simple, quick and uniform administrative dispute-resolution procedure be introduced in the generic top-level domains to deal with complaints of the deliberate, bad faith registration and use of domain names in abuse of trademark rights. Domain name applicants would be required to agree, in the domain name registration agreement, to submit to the procedure at the request of any third party. The litigation rights of both parties would be preserved. The results of the procedure would be enforced by all registration authorities. The recommended procedure is modest in its scope, in that it seeks to address only deliberate, bad faith abuses of rights, rather than all disputes between domain names and intellectual property rights. It does not, thus, seek to provide a comprehensive solution to the multi-jurisdictional nature of disputes between domain names and intellectual property rights that is a consequence of the global nature of the Internet and the global presence to which a domain name registration gives rise. Even in its approach to abusive practices it is cautious. Only the bad faith abuse of trademark rights fall within its scope, and not the bad faith abuse of cognate rights, such as personality rights, the names and acronyms of the United Nations and other international organizations or geographical indications.
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(iii)

  Famous marks have clearly been the special subject of attention from cybersquatters and have most frequently been the target of predatory and parasitical practices. To extend to them in cyberspace the special protection that they already enjoy in national and international law, it was recommended that a mechanism be introduced allowing for the grant, following an adjudicatory procedure, of an exclusion where it is shown that a mark is famous across a widespread geographical area and across various classes of goods. The effect of the exclusion would be to prohibit any person other than the owner from registering the famous mark as a domain name. Not all well-known marks would thus qualify for an exclusion. Marks that are well known only within one country or within one specific class of goods or services would not qualify.

(iv)

  Finally, the Report addressed, from the perspective of intellectual property, the eventual impact of adding new generic top-level domains. Here, the Report found that, if the recommended improved registration practices, uniform dispute-resolution procedure and mechanism for granting exclusions for famous marks were adopted, the introduction of new generic top-level domains would be unlikely to harm unduly the protection of intellectual property, provided that any such new gTLDs were added in a controlled manner.

The Present Status of the Recommendations

    The WIPO Report was submitted to the Interim Board of the Internet Corporation for Assigned Names and Numbers (ICANN) following its publication on April 30, 1999. The Report was posted for comment by ICANN on its website, with a view to consideration by the Interim Board at its meeting in Berlin on May 27, 1999.
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    In addition to the scheduled consideration of the WIPO Report by the ICANN Board in Berlin, the Report was also considered by the Governmental Advisory Committee (GAC) of ICANN on May 25, 1999. The GAC is one of the advisory committees established under the ICANN Bylaws (Article VII, Section 3(a)), with a mandate to ''consider and provide advice on the activities of the Corporation as they relate to concerns of governments, particularly matters where there may be an interaction between the Corporation's policies and various laws, and international agreements.'' The meeting of the GAC on May 25, 1999, was attended by representatives of 29 governments and four intergovernmental organizations. In respect of the WIPO Report, the GAC adopted a recommendation stating, inter alia, that:

 ''The GAC reaffirms the requirement for transparency and reliability of DNS registration data, as recommended by the WIPO Report, and requests that ICANN put in place an appropriate system to authorize and ensure access to data, consistent with applicable law or standards, including defining the purposes of such access'';

 ''In view of the extensive public international consultations undertaken by WIPO in cooperation with ICANN during 1998–1999, we look to ICANN's procedures to result in rapid resolution of the issues concerning dispute settlement and treatment of well known and famous marks. Specifically, the GAC calls on ICANN to report on implementation of the dispute settlement proposals by its Santiago [August 24 to 26, 1999] meeting and to engage in further consultations with the Supporting Organisations and Advisory Committees with respect to the treatment of well known and famous marks.''(see footnote 2)

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    The action taken by the ICANN Board at its meeting on May 27, 1999, is recorded in a resolution(see footnote 3) whose effect may be summarized as follows:

(i)

  It was noted that ''most of'' the recommendations in the WIPO Report concerning registration practices were closely similar to ''many of the elements'' of the Statement of Registrar Accreditation Policy that had been adopted by the Board on March 4, 1999. That Statement had been drafted after the publication of the Interim Report of the WIPO Process, which was published on December 23, 1998, and had adopted many of the draft recommendations of that Interim Report.

(ii)

  Two actions seem to have been contemplated by the resolution of the ICANN Board in respect of a uniform dispute-resolution policy. First, the ICANN Board ''encourage[d] the testbed registrars to work together to formulate a model uniform dispute resolution policy for voluntary adoption.'' Secondly, the ICANN Board referred the recommendations in the WIPO Report on a uniform dispute-resolution policy to the ICANN Domain Name Supporting Organization (DNSO) for recommendations to be submitted to the ICANN Board by July 31, 1999, together with ''any other recommendations the DNSO may have concerning a uniform dispute resolution policy.'' In addition, the ICANN Board invited comments from all persons desiring to make written comments on a uniform dispute resolution policy by August 20, 1999, in advance of the meeting of the Board scheduled for Santiago from August 24 to 26, 1999, at which meeting Board action on such a policy was scheduled.
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(iii)

  The recommendations in the WIPO Report on famous marks and the impact of the introduction of new gTLDs were referred to the ICANN DNSO for recommendations to be submitted to the ICANN Board ''at the earliest practicable time after the Board's meeting scheduled for August 24 to 26, 1999, in Santiago.''

Two Urgent Issues: Contact Details and Uniform Dispute Resolution

    Of the four sets of issues covered by the recommendations contained in the WIPO Report (registration practices, uniform dispute resolution policy, famous marks and the impact of adding new gTLDs), two appear to be at a critical juncture. These are the questions of registration practices, particularly in relation to the availability of contact details of domain name registrants, and a uniform dispute-resolution policy. They are critical at the moment both because they are of immediate operational significance, since five testbed registrars have been accredited to participate in the Shared Registry System for the .com, .net and .org top-level domains and a further 52 post-testbed registrars have also been accredited, and because the existence of reliable and accurate contact details and a viable uniform dispute-resolution policy are the fundamental, minimal conditions for preventing the fraudulent abuse of intellectual property rights in the DNS. (The other two areas of the WIPO recommendations (concerning famous marks and the impact of new gTLDs) are certainly of immense importance also. They are likely to become operationally significant, however, only when a plan is developed for the deployment of new gTLDs, since it is generally thought that the owners of famous marks have been able to resolve the problem of the registration of the exact name of famous marks (as opposed to close variations thereof) in the existing gTLDs through a combination of litigation and negotiation over the past five years.)
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Contact Details

    The WIPO Report found that the unreliability of contact details of domain name registrants was a major impediment to intellectual property owners in defending their rights against abusive registrations. The Report recommended several measures to ameliorate the present situation, including the requirement of representations by domain name applicants that the information supplied by them is true and accurate, and the inclusion of a term in the domain name registration agreement making the supply of inaccurate or unreliable information, or the failure to update information, a basis for cancellation of the registration agreement. In particular, the WIPO Report recommended the implementation of a takedown procedure whereby, upon service of a notification in due form by an interested third party that contact details were unreliable and that contact could not be established with the domain name holder, and upon independent verification of the unreliability of those details, the registrar would be required to cancel the corresponding domain name registration.

    The WIPO Report found that a number of other public policies coincided with the interests of trademark owners in requiring the availability of reliable and accurate contact details of domain name registrants. In the field of intellectual property, the protection of copyright and the prevention of copyright piracy require the availability of such details as a means of establishing who is responsible for illegal content on the Internet. As the digital consumer economy expands, the prevention of fraud and dishonest commercial practices, as well as the protection of consumers and minors, also support the availability of such details. The only interests formulated against the availability of contact details were the interests of privacy and the protection of free political speech, which can be accommodated already through hosting services provided by a number of Internet Service Providers. In addition, the expansion of the domain name space by the addition of new gTLDs offers the possibility, in the future, of further accommodating such interests through appropriate differentiation in the gTLDs, for example, through the addition of a use-restricted gTLD reserved for non-commercial speech. The Report did not recommend that a new use-restricted, non-commercial domain be added, but did recommend that the possibility of the addition of such a domain be explored further.
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    We believe that the implementation of the takedown procedure recommended in the WIPO Report as a means of ensuring the availability of reliable and accurate contact details is a fundamental requirement that is urgently needed in order to ensure that rights which are universally recognized in national and international law can be effectively respected in cyberspace.

Uniform Dispute-Resolution Policy

    It is to be noted that all policy pronouncements on dispute resolution in the gTLDs have endorsed the desirability or necessity of uniformity in the dispute resolution policy applied in the gTLDs. This was not only the conclusion of the WIPO Report, but also the position adopted in the White Paper and in the ICANN Board resolution of May 27, 1999. This unanimity of view is inspired by recognition that different policies could open the way to different degrees of respect for intellectual property protection, especially as registration services become available on a wider geographical basis. If the policy is not uniform, some registrars might adopt policies that provide little protection against abusive registrations, thus paving the way for infringement havens and forum shopping.

    The perceived danger in the current situation with respect to the implementation of the WIPO recommendations on a uniform dispute-resolution policy is that the two-track process initiated by the ICANN Board may lead to different policies, thus making the retrospective application of uniformity practically impossible. If the testbed registrars were to adopt voluntarily a different policy from the one recommended by WIPO, or from the one that may emerge from the recommendations of the DNSO, the opportunity for uniformity may be missed.
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    In order to endeavor to sew the various threads of actions on dispute resolution into a consistent fabric, WIPO has convened a working meeting of testbed and post-testbed registrars in Washington on June 27, 1999, to discuss the practical details of a uniform dispute-resolution policy, based on the WIPO recommendations, that those registrars might consider adopting voluntarily. The meeting has been convened at the request of several of the registrars that have been discussing with WIPO the details of a dispute-resolution policy. It is hoped that it may produce some progress towards bringing together the various movements that have been set in train to deal with the development of a uniform dispute-resolution policy.

    We believe, as mentioned above, that the WIPO recommendations on a uniform dispute-resolution policy are practical, minimalist and the result of extensive consultation with both the public and private sectors on the national and international level. We believe that they afford a sound basis on which to proceed in the gTLDs. In addition, we believe that they have attracted much support amongst the administrators of country-code top-level domains (ccTLDs), and that there is a good possibility of the voluntary adoption of the same policy, when emanating from an intergovernmental organization, by many of those administrators. To this end, at the request of the Permanent Secretariat of the General Treaty on Central American Economic Integration (SIECA), WIPO is organizing a meeting of all administrators of ccTLDs in the Central American region for their consideration of the adoption of the policy recommended by WIPO. We hope that other such meetings may follow.

    Mr. Chairman and Members of the Committee,

    It was a privilege for WIPO to be given the mandate to conduct the WIPO Internet Domain Name Process by the United States Government and the Member States of WIPO. It was a novel exercise for the Organization, since it involved endeavoring to establish recommendations with the direct involvement of both the public and private sectors, recommendations which it was hoped might find consensus in both those sectors internationally. In this respect, we consider that the Process has implications that are broader than just domain names, since it may provide a prototype for means of dealing with pressing international issues in the rapidly developing area of electronic commerce and the digital economy. For that to be the case, however, it must be shown that this type of Process has inherent advantages over the tested traditional approach to international issues of multilateral State-to-State negotiations over an extended period of time. It must also be shown that the voices of governments are not drowned in a mass of undifferentiated comment from quarters where interests are not always immediately transparent. For these reasons, as well as what we believe to be the inherent acceptability of recommendations based on consultations with governments and private corporations and individuals that is unlikely to be replicated in any of the supplementary processes initiated by the ICANN Board, we consider that action on the WIPO recommendations, in an appropriate timeframe corresponding to that in which the WIPO Process was conducted, is of fundamental importance.
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    Mr. Chairman and Members of the Committee,

    It was also a privilege to have this opportunity to present the Report of the WIPO Internet Domain Name Process to you.

63594a.eps

    Mr. COBLE. Mr. Roberts.

STATEMENT OF MICHAEL ROBERTS, INTERIM PRESIDENT AND CEO, INTERNET CORPORATION FOR ASSIGNED NAMES AND NUMBERS (ICANN)

    Mr. ROBERTS. Mr. Chairman and members of the subcommittee, I welcome the opportunity to appear here today to discuss the activities of the Internet Corporation for Assigned Names and Numbers, ICANN, regarding the relationship between Internet domain names and intellectual property rights.

    ICANN is the nonprofit, private sector corporation formed by a broad coalition of the Internet's business, technical and academic communities last October in response to the invitation of the United States Government in its statement of policy on management of Internet names and addresses known as the White Paper.

    ICANN has been designated by the government to serve as the global consensus entity to which it is transferring responsibility for coordinating the assignment of Internet protocol parameters, to management of the domain name system, the allocation of the IP address space and the management of the Internet route serving system.
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    Recognizing the large number of witnesses appearing today, I will devote my presentation to a concise report on the status of ICANN's consideration and treatment of intellectual property rights in connection with the domain name system.

    As noted above, the White Paper contemplated that ICANN would assume responsibility for four Internet coordination functions, one of which is overseeing operation of the domain name system.

    As the White Paper also recognized, the increasing commercial use of the Internet has given rise to increasing conflicts between the domain name system and intellectual property. To help resolve this trademark dilemma, the White Paper envisioned that the WIPO organization would initiate a balanced and transparent process, which you have just heard about from Mr. Gurry.

    Following the request of the government in 1988 and 1999, WIPO conducted this process, which you have also had described, and submitted its final report to the ICANN board on April 30th of this year.

    ICANN began consideration of the final report at its quarterly meeting in May in Berlin, and at that meeting we responded to the report in the following manner:

    First of all, nearly all of the WIPO recommendations on registration practices had already been included in the ICANN registrar accreditation policy, which the board adopted in March, 1999, in preparation for the April onset of competition in the business of registering names in .com, .net and .org. In particular, this accreditation policy requires that accurate contact information be made publicly available on a real-time basis and that registrations not be activated until the registrar receives a reasonable assurance of payment such as through the use of a credit card.
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    Secondly, with respect to dispute resolution procedures, the board endorsed the WIPO-recommended principle there should be a uniform policy for all registrars in the .com, .net and .org domains. At this meeting, the board also took action to charter its Domain Name Supporting Organization called for in its bylaws, which is responsible for evaluating policies concerning domain names. The details of an appropriate policy were referred to our Domain Name Supporting Organization, which has been generically working on this set of issues, and you will hear from later witnesses their progress on that matter.

    Thirdly, to avoid unnecessary conflicts pending adoption of a formal policy, the board passed a resolution calling on the testbed registrars, who are in the process of entering the business, to work together to formulate a model dispute resolution policy; and they also have been energetically pursuing that goal as recently as the meeting here in D.C. Yesterday.

    Finally, the topics of famous-names exclusions and establishment of new top-level domains has appeared to engender more controversy in the Internet community. We have asked the DNSO to investigate, analyze, study and report back to us on these matters, with at least a preliminary report due to us in October. So it may be posted for public comment and possible action at our meeting in Los Angeles the first week in November.

    I thank the committee for the opportunity to present this report and look forward to answering any questions you might have.

    Mr. COBLE. Thank you.

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    You gentleman are beating the red clock. I commend you for that.

    [The prepared statement of Mr. Roberts follows:]

PREPARED STATEMENT OF MICHAEL ROBERTS, INTERIM PRESIDENT AND CEO, INTERNET CORPORATION FOR ASSIGNED NAMES AND NUMBERS (ICANN)

    Mr. Chairman and Members of the Subcommittee:

    I welcome the opportunity to appear here today to discuss the activities of the Internet Corporation for Assigned Names and Numbers (ICANN) regarding the relationship between Internet domain names and intellectual property rights.

    ICANN is the non-profit, private sector corporation formed by a broad coalition of the Internet's business, technical, and academic communities in October 1998 in response to the invitation of the U.S. Government in its Statement of Policy on Management of Internet Names and Addresses, 63 Fed. Reg. 31741 (June 10, 1998), usually known as the ''White Paper.'' ICANN has been designated by the Government to serve as the global consensus entity to which it is transferring responsibility for coordinating the assignment of Internet protocol parameters, the management of the domain-name system, the allocation of the IP address space, and the management of the Internet root server system.

    Recognizing the large number of witnesses appearing today, I will devote my presentation to a concise report on the status of ICANN's consideration and treatment of intellectual property rights in connection with the domain-name system. As noted above, the White Paper contemplated that ICANN would assume responsibility for four Internet coordination functions. One of those functions involves overseeing operation of the domain-name system.
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    As the White Paper recognized, the increasing commercial use of the Internet has given rise to increasing conflicts between the domain-name system and intellectual property. To help resolve this ''trademark dilemma,'' the White Paper envisioned that ''the World Intellectual Property Organization (WIPO) would initiate a balanced and transparent process, which includes trademark holders and members of the Internet community who are not trademark holders,'' to recommend procedures for minimizing problems between the trademark and domain-name systems. 63 Fed. Reg. at 31747. Accordingly, in the White Paper the U.S. Government stated its intent to ''[a]sk WIPO to convene an international process including individuals from the private sector and government to develop a set of recommendations for trademark/domain name dispute resolutions and other issues to be presented to the Interim [ICANN] Board for its consideration as soon as possible. . . .'' 63 Fed. Reg. at 31751.

    Following this request, in late 1998 and early 1999 WIPO conducted an extensive process to gather comments from interested parties and, on April 30, 1999, WIPO submitted its Final Report to the ICANN Board containing recommendations in the following areas:

 Domain-name registration practices to reduce conflicts with intellectual property rights. (Chapter 2 of Final WIPO Report.) Although the Final Report included a large number of recommended registration practices, the most noteworthy relate to ensuring that accurate contact information is available about domain names and to providing that registrars receive prepayment before name registrations go active.

 A procedure for administrative resolution of disputes over domain-name registrations. As reflected in Chapter 3 of its Final Report, WIPO recommended that an administrative dispute-resolution procedure be required only in cases arising from ''abusive'' domain-name registrations.
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 In Chapters 4 and 5, the Final WIPO Report recommended that famous and well-known marks be excluded from registration as domain names (other than by their owners) and that new global top-level domains be introduced only at a controlled rate after famous-mark exclusions are in effect.

    ICANN began consideration of the WIPO Final Report at its quarterly meeting on May 26–27, 1999. At that meeting, the ICANN Board responded to the WIPO Report in the following manner:

 Nearly all of the WIPO recommendations on registration practices had already been included in the ICANN registrar accreditation policy, which the Board adopted in March 1999 in preparation for the April 26, 1999, onset of competition in the business of registering names in the .com, .net, and .org domains. In particular, the ICANN registrar accreditation policy requires that accurate contact information be made publicly available on a real-time basis and that registrations not be activated until the registrar receives a reasonable assurance of payment, such as through use of a credit card.

 With respect to dispute-resolution procedures, the ICANN Board endorsed the WIPO-recommended principle that there should be a uniform dispute policy for all registrars in the .com, .net, and .org domains. At its May meeting, the ICANN Board also took action to institute the ICANN Domain Name Supporting Organization (DNSO), which is responsible for evaluating policies concerning domain names. The details of the appropriate uniform dispute-resolution were referred to the DNSO, which was requested to propose a specific policy in time for adoption by the Board at the next quarterly ICANN meeting, in August 1999.
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 To avoid unnecessary conflicts pending adoption of a formal policy, the ICANN Board passed a resolution calling on the testbed registrars, who are in the process of entering the domain-name registrar business, to work together to formulate a model dispute resolution policy for voluntary adoption.

 The topics of famous-names exclusions and establishment of new top-level domains appeared to engender more controversy in the Internet community. Accordingly, the ICANN Board asked the DNSO to evaluate these aspects of the WIPO report and develop recommendations on these topics once the DNSO completes work on the dispute-resolution policy.

    Since the quarterly ICANN meeting in May, the DNSO has been working diligently on the dispute-resolution issues. A working group has issued a report, which is being considered by the DNSO Names Council. Two of the other witnesses at this hearing are members of the Names Council, and can provide you details on those proceedings. The ICANN Board looks forward to receiving the DNSO report on dispute resolution in the near future, so that it may be considered at the ICANN Board meeting at the end of August.

    I thank the Committee for the opportunity to present this report, and look forward to answering any questions you might have.

    Mr. COBLE. Mr. Daniels, don't feel any undue pressure about that. Good to have you with us.

STATEMENT OF MICHAEL A. DANIELS, CHAIRMAN OF THE BOARD, NETWORK SOLUTIONS, INC. (NSI)
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    Mr. DANIELS. Thank you very much, Mr. Chairman.

    Good morning and good morning to members of the subcommittee. My name is Mike Daniels, and I am the Chairman of the Board of Directors of Network Solutions, Incorporated. I very much appreciate the opportunity to appear before you today to discuss the domain name system and its interrelationship with intellectual property rights and the role of Network Solutions, as a registrar of domain names, and the role that we play in all of this.

    First, I want to state as clearly as I possibly can that we at Network Solutions understand and appreciate the importance of intellectual property rights. In this ''new economy,'' intellectual property rights are the assets on which companies are built. Indeed, our company has made a substantial investment in developing the software and systems necessary to run the domain name system and, now, to share the registration of second-level domain names in .com, .org and net. Accordingly, we have worked with many of the organizations represented here today to ensure that we are doing all we can to help them protect their valuable trademarks and copyrights. In that regard, trademark owners and copyright holders will continue to have free access to Network Solutions's database.

    Beside me is Phil Sbarbaro, our outside Chief Counsel, who has represented us in numerous trademark domain name disputes and served on the expert panel of the World Intellectual Property Organization, which produced the report discussed today.

    We are all aware of the enormous influence Internet cyberspace is having on the governments of the world, our commercial marketplace and, of course, our children. The Internet is a unique global medium of communications. Network Solutions as a registrar of second-level domain names on the Internet has been a part of the growth of this new medium.
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    It wasn't so long ago that the Internet was basically a self-contained Intranet for American defense and academic research. The National Science Foundation, however, had a vision to foster private investment in growth in computer communications. I continue to believe that even the NSF never contemplated the changes and the successes we have all witnessed in the last 6 years.

    Change, of course, brings problems. One problem, which was nonexistent before the fall of 1994, is the confrontation between persons who, either intentionally or unintentionally, create an address on the Internet, a domain name, which includes someone else's trademark. As you will see from my written statement, Network Solutions has considerable experience in these disputes. We developed and initiated a dispute policy with the concurrence of the National Science Foundation in an attempt to recognize the rights of trademark owners while giving domain name holders the time and the alternatives to resolve the disputes.

    It has been a very delicate balance. The mechanics of how the policy works are described in my written statement.

    We have 20 full-time people at Network Solutions who administer that policy. To date, 3,300 disputes out of 5 million domain names have resolved themselves through administration of our policy. While that number may be statistically small, it can be enormous when you are facing the potential liability in damages or court-ordered injunctions. Network Solutions has solely borne the risk and the administration and litigation costs associated with this complex set of issues.

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    Even with the policy in place, we have been the target of 50 such lawsuits, either by trademark owners or domain name holders. Without immunity, insurance or any legal precedent in this kind of dispute, we at Network Solutions have basically been on our own. We believe Network Solutions has met these challenges while keeping up with the incredible demand for services. We believe that we have fully complied with every provision in the Cooperative Agreement under which we have agreed to operate since 1993.

    We have now, as recently as yesterday, met with 10 of the testbed registrars at Georgetown University; and we have come together as an industry of registrars to reduce the friction between trademark owners and domain name holders, once a dispute occurs, to reduce the costs and time to resolve it.

    We are in the process of completing a new dispute policy for consideration of all registrars in .com, .org and .net. It is in the interests of all registrars and the interests of the Internet to make this happen. We must eliminate cyberpiracy from the domain name system.

    On behalf of Network Solutions, I thank the committee for inviting me to testify today. Balancing the interests of intellectual property rights, freedom of expression and Internet growth is a very difficult task. The infrastructure of the Internet is more fragile than many people realize and will require this committee's best analysis.

    Thank you.

    Mr. COBLE. Thank you, Mr. Daniels.
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    [The prepared statement of Mr. Daniels follows:]

PREPARED STATEMENT OF MICHAEL A. DANIELS, CHAIRMAN OF THE BOARD, NETWORK SOLUTIONS, INC. (NSI)

INTRODUCTION

    Good morning, Mr. Chairman and Members of the Subcommittee. My name is Mike Daniels and I am the Chairman of the Board of Directors of Network Solutions, Inc. I appreciate the opportunity to appear before you today to discuss the domain name system and its interrelationship with intellectual property rights and the role Network Solutions, as a registrar of domain names, plays in all of this.

    First, I want to state as unequivocally as I possibly can that we at Network Solutions understand and appreciate the importance of intellectual property rights. In this ''new economy,'' intellectual property rights are the assets on which companies are built. Indeed, we ourselves have made a substantial investment in developing the software and systems necessary to run the domain name system and, now, to share the registration of second-level domain names in .com, .org, and .net. We know firsthand how important the protection of intellectual property rights is to the future of any concern. Accordingly, we have worked with many of the organizations represented here today to ensure that we are doing all we can to help them to protect their valuable trademarks and copyrights.

    Network Solutions understands that trademark owners and copyright holders want immediate action when they believe that their valuable property is being infringed or abused. At the same time, if someone is a domain name holder who has had the use of a particular domain name for a period of time and has built a business around it, we understand that they have a different set of interests.
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    Beside me is Philip Sbarbaro, our outside Chief Litigation Counsel, who has represented us in numerous trademark-domain name disputes and has served on the expert panel for the World Intellectual Property Organization (''WIPO'') which produced the Report discussed today. With the Committee's permission, I shall call upon his expertise during the hearing.

THE INTERNET

    The Internet is more than ''a matrix of networks that connects computers around the world.''(see footnote 4) It is a ''unique and wholly new medium of worldwide communications.''(see footnote 5) It is surely a new medium which will forever change the way we communicate with each other—a global medium without borders. This hearing, in part, is to consider the establishment of one of the borders. We are all looking for the appropriate framework from which to address these very difficult issues.

    One can argue about the Internet's ''value'' and effect upon society, but no one should fail to see that it is a phenomenon of enormous proportions. Network Solutions stands ready to engage with all parties at all times to come to resolution on these issues. We are here to balance the public and private interests involved.

    We at Network Solutions believe that the Internet and the electronic commerce revolution are the most radical transforming technological events in the past twenty-five years. Change, of course, brings problems. The challenge is to turn change into success and problems into solutions for all participants.
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    One problem with the Internet, non-existent before 1994, is the confrontation between persons who, either intentionally or unintentionally, create an address on the Internet which includes someone else's trademark.

    Network Solutions, a registrar for the .com top level domain on the Internet, finds itself caught between the millions of trademark owners, worldwide, on one side and nearly five million domain name holders(see footnote 6) (increasing at a rate of approximately 300,000 holders per month), again worldwide, on the other side. As a registrar of domain names, however, Network Solutions is not alone.(see footnote 7) There are, at present, 250 registrars of top level domains on the Internet, each with its own requirements for registration, its own dispute policy, and bound by the laws and regulations of its country.

    To this situation, we overlay the laws of trademarks, which vary from country to country, and even within a given country. The Internet, of course, has no geographical boundaries. A Web site in Bosnia can be accessed and seen in California, and the reverse is also true. Thus, the Internet's 21st Century technology is colliding with 19th Century trademark law. As a registrar of domain names, one of the goals has been to survive the collision. Network Solutions doesn't have all of the answers; it doesn't even have some of the questions because new questions arise on a daily basis. It does, however, have the experience of thousands of disputes, fifty of which have included Network Solutions as a party. Although 50 lawsuits out of 5,000,000 domain names is approximately one one-thousandth of one percent, it all depends upon one's frame of reference.

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    In America, we are accustomed to solving problems ''right now.'' Well, with regard to domain names and trademarks, law and order will come to the Internet; it is only a question of time. Meanwhile, the courts have and will continue to resolve these trademark—domain name matters on a case by case basis. Each case is different and requires intelligence, objectivity, and fairness—the best attributes of our judiciary. Not only are we all bearing witness to history, both legal and technological, we are central participants as it is being made.

PROBLEM MAGNITUDE

    In April, 1999, WIPO estimated that there were approximately 7.2 million domain names in existence across the 250 top level domains on the Internet. Network Solutions has registered approximately 5 million of those 7.2 million domain names, or approximately 70%. There are, at present, seven global top level domains (''TLDs''), three of which (.com, .org, and .net) are ''open,'' in the sense that there are no restrictions on the persons or entities that may register names in them.(see footnote 8) There are approximately 243 country code top level domains, known as ''ccTLDs.'' As the WIPO Report points out, functionally, there is no distinction between the seven global TLDs and the ccTLDs. A domain name regsitered in a ccTLD provides exactly the same connectivity to the Internet as a domain name registered in a global TLD.

    Network Solutions is the registry for .com, .org, .net and .edu. Com (standing for ''commercial'') is approximately 80% of all of Network Solutions' registrations, with the other three TLDs accounting for the remaining 20%. Approximately 85% of the disputes between trademark owners and domain name holders, in our experience, are found in the .com TLD.
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    Since 1995, Network Solutions has received approximately 6,600 complaints from trademark owners concerning registered domain names, half of which (approximately 3,300) became full-fledged disputes under Network Solutions' Dispute Policy. It has been estimated that around 500 trademark owner—domain name holder cases have come before the courts. This estimate is, in part, based upon the number of ''Registrar Certificates'' issued by Network Solutions, by which the registrar, through the plaintiff in each case, deposits complete dominion and control over the domain name registration in issue with the court hearing the matter.(see footnote 9) Eventually, each case ends, either on a jurisdictional battle, settlement, dismissal, or a well-reasoned opinion.

THE TRADEMARK OWNERS' POSITION

    Over the years, we have heard from many trademark owners who have spent many generations and many millions, if not billions, of dollars, lire, kroner, pounds, marks, etc., instilling their trademarks and service marks with source identification and an expected level of quality. From the trademark owners' point of view, there is no new issue presented by the phenomenon known as the Internet. It is just one more medium, just one more marketplace, where all normal legal constraints and precedents apply. There is nothing ''special'' about the Internet or a domain name. Take someone's trademark as a domain name on the Internet at your peril; ignorance is no excuse. Trademark owners tend to assume that a domain name is synonymous with a trademark. Once that assumption is made, causes of action against domain name holders are limited only by the creativity of the trademark owners' counsel. Infringement, dilution, unfair competition, and interference with prospective economic advantage, in all of the various federal and state varieties, tend to be pled most often.
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    On occasion, trademark owners sue domain name holders who also have nearly identical trademarks.(see footnote 10) The causes of action tend to be the same as described above, with the addition of claims for breach of contract. In some cases, the two trademark owners have met before and have some sort of bilateral agreement which predates the Internet conflict, and it is this agreement that is alleged to have been breached.

THE DOMAIN NAME HOLDERS' POSITION

    To the domain name holders, ''first come, first served'' has always been the rule on the Internet. A domain name holder, who has applied for and obtained a domain name, who has been using it unaccosted and without interruption for months or years, either in business or simply as a communications medium, is suddenly confronted by a trademark owner who claims a right to his or her domain name.

    When attacked or even threatened by a trademark owner, domain name holders respond in kind by suing for declaratory judgment, alleging, inter alia, an actual and justiciable controversy, ''senior rights'' and prior use on the Internet, no violation of law concerning infringement or dilution, and the equitable right to continued use.

THE REGISTRAR'S POSITION

    Faced with powerful, yet conflicting positions from both sides, Network Solutions, or any registrar for that matter, has to fend for itself. Without immunity from or insurance for such liability and without legal precedent, Network Solutions had to find a way to balance these competing interests and to survive these conflicts.
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    To protect the registrar from attack from trademark owners, and to give domain name holders a certain amount of time to determine their own destiny, Network Solutions implemented a Dispute Policy (the ''Policy''), effective July 1995, with the concurrence of the National Science Foundation. The Policy does not resolve any dispute; it was not intended to resolve disputes. It was and is intended to protect the domain name registrar from open-ended damages and court-ordered injunctions which could have crippled the registrar and disrupted the Internet. The Policy presents a domain name holder with five possible responses to an attack upon his or her domain name registration by an owner of a federally registered trademark.(see footnote 11)

    The Policy provides that, if an owner of a federally registered trademark provides to Network Solutions a certified copy of its ''valid and subsisting'' federally registered trademark, and that trademark is identical to a registered domain name, then Network Solutions will send a letter to the domain name registrant offering the registrant certain options. As one option, the registrant may provide Network Solutions with a certified copy of its own trademark registration, in which event the registrant may continue to use the domain name until Network Solutions receives a court order directing otherwise. A second option permits the registrant to transfer the domain name to the trademark owner. A third option allows the registrant to create a new domain name, registered without cost, to be used for ninety days in conjunction with the disputed domain name. After the expiration of the ninety-day period, the allegedly infringing domain name would be placed on ''hold'' status so that no one could use that domain name until resolution of the dispute between the domain name registrant and the trademark owner. Fourth, the registrant may refuse to transfer the domain name or to create a new name. In that event, the domain name is placed on ''hold'' status and no one is permitted to use the name. Finally, a domain name holder who has been threatened by a trademark owner can sue the trademark owner for declaratory judgment concerning their registration of the domain name.(see footnote 12)
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The ''hold'' provision incorporated in each domain name registration contract is the provision to which domain name holders have objected. Some domain name holders believe that it is the registrar's ''duty'' to permit the domain name's use to continue unobstructed, and thus incur liability as a contributory infringer, or even diluter. The registrar has assumed no such ''duty'' and each domain name registrant, by registering his or her domain name, understands and contractually agrees that no such duty exists.

    The Policy is incorporated into each registration agreement between every domain name holder and Network Solutions.

    Finally, Section 10 of the Policy makes three points abundantly clear: (1) the registrar, although not named in a particular case, will immediately abide by any court order which is issued in a case between a trademark owner and a domain name holder; (2) the registrar will deposit the domain name, through notarized declaration (the ''Registrar Certificate''), with the registry of the court which will then have complete dominion and control over the registration record; and (3) regardless of which party (trademark owner or domain name holder) first sues the other party, the registrar will maintain the status quo ante and not touch the domain name registration record. If Network Solutions is named as a party to one of these suits, however, Section 10 also makes it clear that the registrar will not be limited to these provisions, but may raise any and all defenses deemed appropriate, and take any other action necessary to defend itself. To date, Network Solutions has not been held liable in any suit brought by a trademark owner or a domain name holder.

    There are those who, without benefit of the facts, argue that Network Solutions' Policy ''is not working.'' Perhaps, the Policy did not facilitate the result they wanted in a particular instance, or they simply believe that the registrar should assume greater liability for its $35 per year registration fee per domain name. Whatever the reasons, statistics bear out the undeniable conclusion that the Policy is, in fact, working.
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NETWORK SOLUTIONS DOES NOT AND CANNOT POLICE TRADEMARK USAGE ON THE INTERNET

    Network Solutions permits the registration of domain names on a ''first-come, first-served'' basis much like the process used by a telephone company or a stock exchange.(see footnote 13) To attempt to overlay the registration of domain names with a screening or regulatory function would severely disrupt the rapid expansion of the Internet by bringing the registration of domain names to a virtual halt.(see footnote 14) Neither Network Solutions nor any other domain name registrar has the expertise, authority, or governmental immunity that would be necessary to perform such a function.

    Network Solutions' ''contact'' with the domain name registrant is at the point of registration. Prior to registration, a desired domain name does not exist and cannot be used and thus cannot violate the Lanham Act.(see footnote 15)

    Whether post-registration use of a domain name by the domain name holder violates the Lanham Act depends on a variety of factors, all of which are beyond Network Solutions' knowledge or control. These factors include, among others: (i) whether the domain name is used in commerce or, instead, is used as a personal or other non-commercial e-mail or Web site address; (ii) whether the use of the domain name is in any way confusing or, instead, is used in a manner that makes it clear who sponsors the particular use; (iii) whether the domain name is used in connection with any goods or services; and (iv) whether the use of the domain name dilutes the trademark owner's mark by blurring or tarnishing the mark.(see footnote 16) Network Solutions has no knowledge of such facts.
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    Network Solutions also has no knowledge of the trademark owner's rights. Network Solutions does not know, and has no means by which to verify, who or how many entities may have rights to a particular mark, or in which classes of goods or geographical areas the trademark owner may have such rights. Similarly, Network Solutions cannot know what defenses may exist to a claim that a particular use is infringing.

    Equally fundamental, Network Solutions does not have the legal authority to screen domain names or to determine conflicting claims of right to use a domain name that includes a trademark. Of course, neither the domain name registrant nor the trademark owner would be bound by a determination by Network Solutions, even if it were to attempt to make one. Network Solutions simply records domain names.

    Network Solutions' business is completely unlike the business of a central registration authority like the U.S. Patent and Trademark Office (''PTO''). In implementing the system of trademark registration, for example, the PTO is government funded, operates under the color of law, and has governmental immunity. A registration system like that used for trademarks could not perform the function of domain name registration. By contrast to the low cost, 5 second registration of domain names, the PTO takes more than 16 months to register a new trademark, and the registration process may cost thousands of dollars and require the assistance of able legal counsel.(see footnote 17) Such a model for domain name registration would seriously hamper or end the growth and ''open door'' qualities that have contributed to the Internet's success.

    Finally, neither Network Solutions nor any other registrar could accept the potential liabilities to which it would be subjected were it charged with responsibility for monitoring domain name usage for theoretical Lanham Act violations.(see footnote 18) Absent governmental immunity, no entity would risk serving as registrar. So far, the courts have agreed.
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    For example, in Lockheed Martin Corporation v. Network Solutions, Inc., 985 F. Supp. 949 (C.D. Cal. 1997), Judge Pregerson of the federal district court, in a 45-page opinion that is well worth the reading, granted the defendant-registrar (NSI—Network Solutions) summary judgment on all counts. There is no synopsis of the Court's opinion which does justice to its precision and common sense.

The issue presented by this litigation is whether NSI violated federal trademark law by accepting registrations of Internet domain names that are identical or similar to Lockheed Martin Corporation's (''Lockheed'') SKUNK WORKS service mark.

                        * * *

Because summary judgment on the above claims is based on Lockheed's lack of a legal right to control the domain name registration process, there is no case or controversy between these parties.

                        * * *

If the Internet were a technically ideal system for commercial exploitation, then every trademark owner would be able to have a domain name identical to its trademark. . . . Commerce has entered the Internet only recently. In response, the Internet's existing addressing systems will have to evolve to accommodate conflicts among holders of intellectual property rights, and conflicts between commercial and non-commercial users of the Internet. ''In the long run, the most appropriate technology to access Web sites and e-mail will be directories that point to the desired Internet address. Directory technology of the necessary scale and complexity is not yet available, but when it is developed it will relieve much of the pressure on domain names.'' Domain Name System, Hearing Before the Subcommittee on Basic Research of the House Science Committee, 105th Cong., 1997 WL 14151463 (September 30, 1997) (testimony of Barbara A. Dooley, Executive Director, Commercial Internet Exchange Association). No doubt trademark owners would like to make the Internet safe for their intellectual property rights by reordering the allocation of existing domain names so that each trademark owner automatically owned the domain name corresponding to the owner's mark. Creating an exact match between Internet addresses and trademarks will require overcoming the problem of concurrent uses of the same trademark in different classes of goods and geographical areas. Various solutions to this problem are being discussed, such as a graphically-based Internet directory that would allow the presentation of trademarks in conjunction with distinguishing logos, new top-level domains for each class of goods, or a new top-level domain for trademarks only. The solution to the current difficulties faced by trademark owners on the Internet lies in this sort of technical innovation, not in attempts to assert trademark rights over legitimate non-trademark uses of this important new means of communication.
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DATED: November 17, 1997            DEAN D. PREGERSON

CYBER PIRACY

    We are here, today, because of the misuse of the domain name system by those who intentionally register someone's trademark as a domain name either to transfer the domain name to the trademark owner for an exorbitant amount or to use the domain name in such a way as to confuse consumers or to tarnish the trademark. These persons have been described as ''cybersquatters'' or ''cyberpirates'' and should be eliminated from the domain name system.

    The collapse of trademark piracy on the Internet is inevitable and none too distant. In every courtroom to date, the trademark owner has prevailed over the cyberpirate. In addition, Congress is considering S. 1255, the Anticybersquatting Consumer Protection Act, which would make cyber piracy a violation of federal statute.

    Trademark owners from around the world have justifiably condemned the piracy that is founded on the exploitation or use of their trademarks as Internet domain names. In response to this problem, the community of trademark owners has called for changes in domain name registration and dispute resolution aimed at protecting their valuable intellectual property rights on the Internet and eliminating the parasitic industry of so-called ''cybersquatters.'' Whether in the seven current global TLDs, newly-created global TLDs, the 80 or so ccTLDs that anyone may register in, or in the 163 ccTLDs that are restricted to those who live within their borders, the problem has received world-wide attention from private industry.
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    The World Intellectual Property Organization (''WIPO''), in its study of cyberpiracy, or ''cybersquatting,'' as the term has been coined, attempted to define the concept more precisely. WIPO's definition uses the term ''abusive registration,'' and focuses both on the attributes of the domain name in question and the actions of the domain name holder who has registered and is using it. First, the domain name must be identical or ''misleadingly similar'' to a trademark or service mark. Second, the domain name holder, who cannot demonstrate any rights or legitimate interest in the domain name, must have registered and be using the domain name in ''bad faith.'' Evidence of bad faith, according to WIPO, is the domain name holder's offer to transfer the domain name registration for valuable consideration to the trademark owner (one form of use), or to attempt to confuse and to attract Internet users for financial gain to the domain name holder's Web site using the domain name that contains the trademark (another form of use). Each situation is, obviously, the deliberate misuse of another's good name and associated goodwill, and has not been permitted by any court called upon to resolve the dispute. The courts are, however, an expensive and time-consuming method of resolution. WIPO has concluded that a mandatory Administrative Dispute Resolution (''ADR'') policy should be implemented to reduce the cost and time involved. WIPO's proposed ADR policy is presented in Chapter 3 and Annexes IV and V of its Report and has many insightful and practical elements.

A POSSIBLE SOLUTION

    Nothing will eliminate either the intentional or unintentional registration and use of a domain name on the Internet by someone who either seeks to confuse as to the source of the product or service, or alternatively, was unaware that his/her actions caused such confusion or dilution. The conflicts, however, when they do occur, could be drastically shortened and resolved with minimal cost to both the trademark owners and domain name holders of the world through the adoption of simple ADR procedures.
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    The solution to cyberpiracy could lie in the low-cost, high-speed resolution of conflicts after they arise. There is clearly a need for a simple, generally uniform, low-cost, summary ADR procedure to be embraced by all of the TLDs of the Internet. The ADR procedure would apply, at first, only to cases of cybersquatting, or ''abusive registration,'' and later, if successful, expanded to other areas of dispute. As WIPO recommends, the ADR procedure could be mandatory for all domain name registrants and be included in each contract between the registrars and their domain name holders. For these procedures to succeed, however, registrars must be committed to the process.

    In concept, Network Solutions agrees that change in dispute resolution is needed. Current dispute policies, such as that of Network Solutions, only cover cases of identical trademarks and domain names, and do not adequately correct cyberpiracy on the scale and imagination we are now encountering on the Internet. Current dispute systems, which handle the existing 7.2 million domain names around the world, may not be scalable to handle the 60 million domain names we might see worldwide in the next few years. Additionally, to date the courts have resolved these issues on a case-by-case basis. As the volume of domain name registrations increases into the many millions, the courts cannot be clogged with these cases. There must be another answer for the future. Other than legislation, ADR presents the best hope, and Network Solutions intends to join with other registrars to develop a system, a solution that works. Whether these changes should be supported by legislative action is for the Members of this Committee to decide.

CONCLUSION

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    On behalf of Network Solutions, I thank the Committee for inviting me to testify today on this important issue. Balancing the interests of intellectual property rights, freedom of expression, and Internet growth is a difficult task. The infrastructure of the Internet is more fragile than many people realize and will require this Committee's best analysis.

    Mr. COHEN. Mr. Cohen.

STATEMENT OF JONATHAN COHEN, PRESIDENT, INTELLECTUAL PROPERTY CONSTITUENCY OF THE DOMAIN NAME SUPPORTING ORGANIZATION OF ICANN

    Mr. COHEN. Thank you, Mr. Chairman and members. I appreciate the opportunity to address you this morning.

    I am here today representing the (in French) International Federation of Intellectual Property Counselors, which, in English, is the International Federation of Intellectual Property Counselors, an international organization of over 4,000 intellectual property practitioners in over 70 countries. As their representative, I was elected as the Intellectual Property Constituency President of the DNSO and as the Provisional Names Council Member.

    The Intellectual Property Constituency was born out of the ICANN DNSO process and is a new and exciting development in the area of intellectual property. The IPC is made up of intellectual property organizations representing trademark, copyright and patent owners and practitioners from over 100 countries and has over 30,000 members. It represents millions of trademark and copyright owners around the world, from small individuals to multinational corporations.
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    This is the first time I think that an umbrella organization of intellectual property has been created which has the potential to speak with one voice for intellectual property around the world. This is one of the exciting developments that is coming out of the international Internet development.

    This is a good beginning for the protection of intellectual property in a world of E commerce. At the risk of sounding melodramatic, without adequate protection of intellectual property in cyberspace there will be no E commerce.

    The IPC has three main points that it wishes to make today:

    First, singing from the same hymn book as everybody else today, the ''Whois'' database absolutely needs to be maintained and available on a free basis for the adequate protection of intellectual property.

    Second, the adequate protection of intellectual property requires that there be a uniform dispute resolution process across all commercial GTLDs that is international in its scope, quick, inexpensive and on line.

    The thoroughly prepared WIPO report to ICANN has now been reviewed by our working group of the DNSO and I, as cochair of that working group, have recommended it be adopted as soon as possible.

    I was at the meeting yesterday with the WIPO and the testbed registrars and I am pleased to say they are also making good progress in trying to achieve uniform dispute resolution policy that can be put in place almost immediately so that there is no hiatus while we are waiting for approval of the WIPO recommendations.
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    I might point out that the IPC recommended in Berlin in May that the WIPO report be adopted forthwith.

    There is no reason that the WIPO dispute resolution ought not to be adopted, and it should be adopted within the next 4 to 8 weeks. With respect, there has been enough talk. I believe it is time for some action.

    The third and final point I have to make is about ICANN, and there are three subpoints under that.

    First of all, let me say that I believe that, generally, the intellectual property and the business community believe that ICANN is on track. It has listened to the intellectual property concerns, and they are reflected in the registrar accreditation process and also in the fact that intellectual property was recognized as a constituent in the DNSO, despite the feeling of many that it was not a proper party.

    I believe that the ICANN process deserves the support of this subcommittee in carrying out its mandate to organize

    the management of the Internet in the private sector. It is a thankless and difficult task for which, as a member of the names council, I have some sympathy.

    However, secondly, there must be at least one IP practitioner on the ICANN board. If IP interests are essential to protect—are to be properly represented, there must be a method for electing the ICANN board that assures IP representation on it. IP must not and cannot be a second-class citizen in the world of international Internet management.
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    Third, ICANN must be adequately funded at this crucial stage in its development. Years of work by thousands of volunteers in the United States and around the world are on the edge of producing a result which is likely to succeed in all areas of Internet management. Funding must be found to ensure ICANN has the resources to succeed in its appointed work.

    Thank you very much. I yield the rest of my time.

    Mr. COBLE. Thank you, Mr. Cohen.

    [The prepared statement of Mr. Cohen follows:]

PREPARED STATEMENT OF JONATHAN COHEN, PRESIDENT, INTELLECTUAL PROPERTY CONSTITUENCY OF THE DOMAIN NAME SUPPORTING ORGANIZATION OF ICANN

SUMMARY

    Mr. Chairman:

    The Intellectual Property Constituency (IPC) of the DNSO urges the Subcommittee to support the Secretary of Commerce initiative in its White Paper of June, 1998 to place Internet technical assistance and governance in the private sector hands of the Internet Corporation for Assigned Names and Numbers (ICANN). We ask for the support of this Subcommittee and the Congress of the United States in continuing to forge a method for international Internet governance that will be secure, reliable and free for the exchange of ideas and information, and for the development and increase of international commerce. We ask this Subcommittee to support a process which protects the rights of American citizens, but also fully takes into account the rights and participation of the international community which is essential to the dynamic development of the Internet and the Domain Name System (DNS). We urge that:
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1) the ICANN process be encouraged and supported, including finding a method for adequate funding, so that it may have a proper opportunity to achieve its goals as stated by the U.S. government;

2) intellectual property interests be recognized by: i) recognizing the need to protect famous marks; and ii) ensuring that there is at least one IPC member (or at least one IP expert from the private sector) on the ICANN Board;

3) a uniform, cost effective, online dispute resolution system be supported and that the WIPO recommendations (particularly concerning bad-faith domain name registrations) to the ICANN Board be adopted and in short order expanded, to deal with a broader range of IP disputes on the Internet;

4) while respecting rights to privacy, the WHOIS database and any others essential to policing illegal activity on the Internet, be made freely available.

    Respectfully submitted by the IPC.

STATEMENT

    Mr. Chairman:

    On behalf of the Intellectual Property Constituency (IPC), I am pleased to briefly present the position and concerns of the IPC(see footnote 19) on three matters:
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1) On the Internet Corporation for Assigned Names and Numbers (ICANN) and the process of Internet governance reform;

2) On the specific concerns of the members of the IPC about intellectual property, vis à vis the domain name system and the ICANN process;

3) Third, on the subject of dispute resolution in relation to domain names on the Internet, and WIPO's proposals therefor.

Background

    The IPC was officially approved and recognized by the Interim Board of ICANN in May, 1999, and is one of seven separate constituency groups which, in addition to the General Assembly (GA), comprise the Domain Name Supporting Organization (DNSO). The DNSO is the first, and currently the only one of the three policy development bodies, or Supporting Organizations (SO's), that was approved by the Interim Board of Directors of ICANN in March, 1999, pursuant to its Bylaws and Articles of Incorporation.

    According to ICANN's By-Laws, each of the seven constituencies of the DNSO is entitled to elect three representatives to the Names Council (NC), the governing body of the DNSO that is responsible for managing the consensus building process of the DNSO and presenting recommendations resulting therefrom to the ICANN Board. The NC carries out this responsibility through the formation of research and drafting committees, working groups and other bodies of the GA that are appropriate to carry out the substantive work of the DNSO. Such bodies must include at least one representative from each constituency, and their work must include such participation and input of other interested parties as is practicable, as well as public posting of and comment periods for, all reports or recommendations presented to the NC.
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    Each of the three Supporting Organizations is also entitled to elect three representatives to the ICANN Board pursuant its By-Laws.

    In accordance with Article VI–B, Section 3 of the ICANN By-Laws, the IPC of the DNSO was formed through a series of consultative meetings in North America and the Asia-Pacific region, during which time a number of successive draft IPC By-Laws were discussed and revised at the meetings before being posted on the ICANN website for further international input on each draft. In addition, current participating organizations actively engaged in further outreach in order to expand the consultation process.

    These IPC formation meetings were attended by representatives of most of the major international intellectual property organizations. The application for accreditation of the IPC which was presented to the ICANN Board in Berlin in May, 1999 not only reflected the consensus of these organizations, which collectively represent tens of thousands of intellectual property practitioners and rightholders both small and large, commercial and individual, in respect of trade-marks, copyright and patents, in all parts of the world, but it also included the participation of the representatives of a second, parallel IPC application, pursuant to negotiations between the two groups in Berlin.

1) ICANN and Internet Governance Reform

    We, the Intellectual Property Constituency of the Domain Name Supporting Organization, strongly urge this Subcommittee and the Congress to support this Administration's effort to find a private management system for the Internet and its Domain Name System (DNS) that, while fully protecting American interests, allows significant international participation and cooperation. In view of the leadership role the United States has historically taken in the development of the world economy, and more recently, in the creation and development of the Internet, as well as the fundamental principles it has historically upheld, the U.S. is clearly in a position to effect and assist the orderly transition of Internet governance.
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    There are many striking similarities between the social and economic factors the United States faces at the end of the 20th century at the dawn of the electronic information age and the early stages of the age of Internet communication, and those which it faced at the close of the last century. In many respects, the challenges are the same.

    By 1999, the industries that fuelled the 20th century have matured. Information technology is beginning to dominate the world economy, requiring a fundamental retraining process in labour markets around the world to fill the exponentially growing needs of a computerized, networked world. It is difficult to foresee how this revolution in communication and information technology will shape the 21st century. It is safe however, to presume that its impact will be profound.

    Today, the United States stands alone as a Superpower. Many would point to its economic and military might as the clear icons of this fact. While they are obviously of much importance, I would submit that they are not the secret of its great success and important place in history.

    The tremendous strength and success of the United States has been its fierce commitment to liberty, individual liberty, and embracing people from all over the world with their different backgrounds and cultures, languages and history. It has resulted in an unprecedented explosion of human creativity in that country over the last century in every sphere of activity—from the entertainment industry, to the space program, human rights, telecommunications, and so on.

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    The Internet has proven in a very short time frame to be an instrument for the creation of incredible wealth, and for reshaping the very fundamental methods by which we communicate, do business, meet people, entertain ourselves, shop, study and even how we carry on our politics. It has become so pervasive in global society that the Internet is, in at least a significant part, about power, money and intellectual property.

    The United States of America has a right to a very strong voice in the control of the Internet. The infrastructure of the Internet, the protocols, commercialization, the ''A'' root server and most of its backups, and a very large percentage of the users are all American. However, the Internet by its nature is an instantaneously international medium that has already been embraced by most of the industrialized nations of the world (and surely would be in the developing world, but for the lack of resources). As with many new media, the ''haves'' have more and the ''have nots'' have less. But like the television and the telephone, Internet access will soon be available to almost anyone anywhere.

    In this light, a decision of this Administration's Department of Commerce to begin to remove the Internet from direct U.S. government control, and further to begin the process of internationalizing it, is a clear measure of its confidence in private individuals and in its first principles. More importantly, this decision is consistent with the globalisation of the world economy and the removal of barriers to trade and services promoted by the U.S.

    Extensive international efforts have been ongoing since the formation of ICANN, to bring into existence the administrative and policy infrastructure that is contemplated by its By-Laws and the White Paper. These efforts extend to all stakeholders in the private sector in the U.S. and around the world who are suddenly faced with the challenges and controversy inherent in attempting to reach the common goal of Internet privatization when the respective interests and concerns may be quite disparate and sometimes even seem to be in direct conflict. The scope of cooperation and harmonization of effort that is required to successfully ''internationalize'' Internet governance is tremendous and unprecedented when placed in the context of an international private sector divided by scores of national boundaries, languages, cultures, politico-legal systems and interests. But clearly, the consensus-building process has begun. It is at these early formative stages of the privatization process that support from the U.S. Congress is most vitally needed to ensure that the international effort and progress that is made is not undermined or overcome by the obstacles standing in its way.
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    Although much time, money and energy have been spent on the development of ICANN to date, it is not possible to yet say whether ICANN is the right organization to deal with the embryonic and embattled process of DNS reform, as well as the other aspects of Internet governance. Only time can test that theory. If ICANN fails, it should be because it is not the right organization to do the job and cannot do it effectively. It should not fail because any persons inimical in interest can successfully sabotage it or because it is deserted by its creators and left without funds to wither and die on the vine. We feel ICANN has every possibility of being the right ''person'' for the job, provided that certain pre-requisites for its successful operation are met.

    One such pre-requisite facing ICANN is its lack of funds required to carry out the mandate with which it has been charged. To date, and in accordance with the Memorandum of Understanding (MoU) between the U.S. Department of Commerce and ICANN which requires ICANN to defray its own expenses, ICANN has relied primarily on corporate financing to fund its activities, including those which were previously funded through contracts or grants by the U.S. government and/or NSI's registration fees. These activities include: the assumption of financial and administrative responsibility for IANA and its staff; the creation of a competitive gTLD Registry-Registrar system, which include the development and implementation of the registrar accreditation process, and the development of appropriate measures to address the issues of registration data backup and WHOIS services in a multiple-registrar environment; the coordination and improvement of the root server system; the assumption of responsibility for the ''L'' root server; and creating and overseeing the international consensus-development process that is necessary for the private sector management of the Internet and DNS (public consultations, international meetings, Supporting Organizations, Advisory Committees).
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    The Interim Board of ICANN proposed to meet its first year transition expenses through a fee of $1 per domain name registration, per year, to be collected from each registrar. The stated position of the Department of Commerce (DOC) is that ICANN is legally entitled to levy such a fee to recover the actual costs associated with its operations and that this is an appropriate cost recovery method that is consistent with the White Paper. However, the DOC also recognized the controversy generated by the user fee and accordingly recommended that ICANN defer its implementation until after the nine members elected by the SOs join the ICANN Board in November, 1999. At the same time, the DOC undertook to cooperate with ICANN and the Internet community to find an interim solution to ICANN's financial difficulties. ICANN has agreed to comply with this recommendation and has taken steps to consult with the entities comprising the DNS infrastructure (name and address registries and the registrars) through the creation of a task force to study alternate methods of cost recovery.

    We urge the Subcommittee to support the DOC in its undertaking to work with ICANN and the Internet community to identify and implement acceptable funding options on an urgent basis.

    The United States has started this process—we ask that it see it through. With great power and wealth come difficult responsibilities. We respectfully submit that this is one of them.

2) Specific Concerns of the IPC

    The Intellectual Property Constituency strongly supports privatization process of Internet governance as set out by the Secretary of Commerce of the United States in the White Paper of June, 1998. However, this is not to say that there are not clear problems and challenges, nor does it suggest that we as a constituency do not have our own concerns about ICANN and its attention to our primary concern—intellectual property.
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    The currency of the Net is intellectual property. Its technology, its commercial use, the spawning of information and ideas is, or is about, patents, trademarks, copyright and domain names. In an information society, the right to protect information and the right to protect creative and commercial effort are critical. This is particularly so in the context of a such a rapidly growing international medium as the Internet, where the average number of users per day has increased by several orders of magnitude from a few thousand people in 1991 to roughly 30 million people per day in 1998, and the number of domain name registrations has risen from 200 per month in 1991–2 to approximately 5,000 per day only five years later. The Internet has clearly assumed a role of critical importance in worldwide commerce.

    The number of trade-marks registered annually in the U.S. alone increased from 28,921 in 1978 to 97,294 in 1997. There were a further 323,967 pending applications in total before the USPTO in 1997. It has been calculated that the nearly 700,000 International Trademarks taken out under the Madrid registration system administered by WIPO are the equivalent of some 3.5 million individual trademark registrations in 47 different countries. Also, in the European Union, the Community trademark system only commenced in 1996 but it has proved immensely popular and over 100,000 applications were filed in the first 3 years. Trade-marks are clearly one of the linchpins of the American and international economy.

    When considered in light of these statistics, it is clear that the right to protection of intellectual property on the Internet is essential, and this necessitates the consideration of specific measures for the purpose of facilitating such enforcement.

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i. Intellectual Property Community Representation on the ICANN Board

    It has been the feeling of many in the IPC that intellectual property concerns have been treated by some as ''second class citizens'' in the process of overall Internet governance reform. None of the current Board members of ICANN have an intellectual property background, and there have been many in the other constituencies that have argued (and some who still argue) that intellectual property lawyers and interests do not belong in the DNSO. The IPC has demonstrated not only that its participation is of very significant importance, but that it is open to working with the other constituencies in a manner consistent with achieving consensus, in a manner consistent with trying to understand the other points of view, in a manner consistent with cooperation, rather than litigation. But we feel strongly that we must be represented on the ICANN Board. We suggest that perhaps the current model for electing the ICANN Board should be revisited.

    The Names Council, which is the governing body of the DNSO, is elected from each of the constituencies that make up the DNSO. Perhaps the ICANN Board should be elected in a similar manner. For example, each constituency of the DNSO could elect one member to the ICANN Board. Each of the other two Supporting Organizations, and ICANN's General Assembly, could elect members to the ICANN Board. Perhaps the government, or some other quasi-governmental body, could appoint several persons to the ICANN Board as Chairpersons in key positions. The Board itself or a Nominating Committee of the Board could appoint a few members from any walk of life, or any country. In this manner, or some other similar format, there would be assurance that all the constituencies that make up the stakeholders of the Internet are represented at the Board level. But it would also ensure that a number of Board members could be nominated on the basis of their suitability and expertise, so that a nucleus of the members of the Board would always be the best people available for the job.
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ii. Concerns of the entertainment / copyright and trade-mark sections of the IPC

    Websites are used to promote and market copyrighted material including: books and other printed matter, music and sound recordings, audio-visual material, databases, and computer software for applications ranging from business to entertainment. Technical support and information regarding these products is also available online, and online delivery of these copyrighted materials in digital form from these websites is increasing. In addition, activities on some websites are becoming integrated into copyrighted products themselves, as with sites for interactive play of computer games over the Internet, or for the provision of enhanced features for commercially distributed audio compact discs.

    This extensive use and distribution of copyrighted material over the Internet raises the following concerns for the copyright industry, and for intellectual property owners in general:

 1) It is vital to the efficient administration of the DNS, that the introduction of competition in domain name registration services not interfere with the ability to register Second Level Domains (SLDs) quickly, reliably and at a reasonable cost.

 2) Copyright-based companies share the same concerns and vulnerabilities as the trade-mark industry in relation to the trade-marks, trade names, service marks, slogans, character names and titles which they own throughout the world. Cybersquatting, warehousing and the other types of trade-mark infringement, dilution or tarnishment which arise in the absence of adequate SLD registration safeguards and dispute prevention / settlement procedures, threaten both the copyright and trade-mark industries equally.
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 3) WHOIS database access: Copyrighted works can be distributed and downloaded in digital form over and from the Internet. A domain name abuser thus has the ability to both weaken, tarnish or dilute a copyright-based company's marks, and usurp some or all of the market for the company's product by making pirated copies of copyrighted material available on their sites, the names of which may or may not directly threaten copyright interests. This activity is a major impediment to the development of electronic commerce and the viability of the World Wide Web itself as a venue for global business. As a result, it is vitally important to the copyright industries that there be some method for preventing or stopping online digital piracy.

      This issue has been addressed by Congress in the Digital Millennium Copyright Act of 1998 (''DMCA'') wherein a non-judicial, effective and efficient ''notice and takedown'' procedure is available to copyright owners, allowing them to work with Internet Service Providers (ISPs) to quickly cut off Internet access to sites where piratical activity is taking place.

      Free, unfettered, real-time access to the full range of registrant data contained in the WHOIS database is necessary in order for copyright owners to be able to use the DMCA's ''notice and takedown'' procedure. WHOIS allows identification of the ISP that hosts or provides connectivity to the site where piratical activity takes place, and therefore the ISP to whom the copyright owner should direct a DMCA notification. Limiting public access to WHOIS information in any way, whether by allowing WHOIS queries only under license, requiring permission from the domain name registrar before making use of WHOIS search results, or by allowing registrars to withhold some or all WHOIS data from the public, would significantly hamper the ability of copyright owners to quickly, inexpensively and reliably determine the proper recipient of a DMCA notification. This could seriously undermine the utility of the DMCA notice and takedown provisions.
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    Additional intellectual property concerns include the following:

 4) The trade-mark community strongly supports the privatization process and feels that significant progress has been made to date. However, out of concern for the maintenance of the integrity of the DNS and the Internet, we believe that ICANN and its SOs should have the proper opportunity to continue the work they have begun.

 5) There must be a dispute resolution system that is mandatory for bad faith registrations, and this system should be expandable, if not immediately available, for broader trade-mark / domain name disputes on the Internet for those who choose to voluntarily use it. Any voluntary dispute resolution system should not interfere with the right of the parties to the dispute to resort to the courts to resolve the conflict.

 6) The development of an online, effective and inexpensive dispute resolution system will be a very important step in ensuring a stable Internet, that can expand to encompass an increasing number of countries outside the traditional industrial powers, where the cost of multijurisdictional protection of one's intellectual property rights would place the costs of participation on the Internet out of the question.

 7) The need for famous marks to be afforded special protection across gTLDs based on proper study and debate.

 8) As stated earlier, there urgently needs to be some focus on ICANN's funding so that it can be self-supporting and independent.
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 9) As already discussed above, there is currently a lack of intellectual property expertise on the ICANN Board. The trade-mark community feels strongly that this issue should be addressed and the suggestions made in this regard supra, should be considered.

10) Emerging intellectual property issues concerning Patents and Designs need to be taken into account at an early stage.

3) Dispute Resolution

    We all know that the Internet poses new problems for the owners of intellectual property. With each new medium, there instantly arise a cross-section of entrepreneurs, flim-flam persons, snake oil salesmen and others whose ingenuity and larceny are often the source of marvel, at least to those who are not being hurt. For intellectual property owners who are the subject of much of the chicanery on the commercial Net, the international nature of the Internet raises new challenges. Balancing privacy rights fairly and yet being able to find the perpetrators and have an effective and uniform method to deal with the bad-faith use of trademarks or domain names on the Internet, and, finding an economical and effective system for dealing with international intellectual property disputes that may cross-cut many national borders, is a very important part of the structure of the Internet required to be put in place to allow the commercial development of the Net to go forward in an orderly and dynamic manner. The intellectual property constituency is playing a significant role in providing advice and counsel to the ICANN Board on the subject of WIPO's proposal to provide dispute resolution services as requested by the Secretary of Commerce in the White Paper of June, 1998. The ICANN Board has asked for the advice of the DNSO on that subject, and the current president of the IPC is the co-chairman of the Working Group on that subject. Recommendations from the Names Council of the DNSO to the ICANN Board will likely be made at the end of July, 1999. The IPC undertakes to forward the recommendations of the Names Council to this Subcommittee, and we urge this Subcommittee to review these recommendations and to support them.
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Conclusion

    At this stage of the development of the ICANN process and of the Internet itself, there are many persons and interests jockeying for power, for control and for money. Each interest has its own persuasive raison d'etre, and many no doubt, have influence in the halls of power of the United States. We of the IPC urge this Subcommittee and the Congress to support the owners, users and practitioners of intellectual property to have their rightful and essential voice in the reform and conduct of Internet governance.

    Although the Internet represents tremendous commercial opportunity for intellectual property rightholders, it has also created a new and ''difficult'' medium for policing the infringement of the rights of copyright and trade-mark owners. By establishing ICANN and the DNSO, the Secretary of Commerce has taken the first important steps to make the governance reform of the DNS and the protection of intellectual property rights proceed in an orderly manner. We strongly urge that this process, and that ICANN and its Supporting Organizations be given the necessary support by the Congress of the United States so that it has a fair opportunity to be effective, and, not be subverted by the selfish pecuniary or political interests of the few. We respectfully submit that the American people will be well served if the ICANN process succeeds. It is now in the hands of the U.S. Congress to review the White Paper of June 1998, which begins the important and necessary process of internationalizing the Internet. We urge this Subcommittee to recognize the fundamental rights of all nations to participate in Internet governance. We respectfully submit that it would be a mistake not to do so. It would not reflect the best interests of the American people, and would merely be a triumph of a few special interests over the clear rights and interests of hundreds of millions of people around the world to a free and democratic Internet. The international nature of this process begun by the Secretary of Commerce, if now supported by this Subcommittee, will only add to its success and to the prestige of the United States Congress and the principles for which it so bravely stands.
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Respectfully Submitted on behalf of the IPC by its President:
Jonathan C. Cohen, FICPI representative

    (*) The opinions expressed hereinabove are an amalgam of the thoughts and views of the members and participating observers of the IPC. Not all members necessarily subscribe to every point made, but, with one exception, there is general overall agreement. The DNRC dissents. Please see <http://www.domain-name.org/dissent723.html> for the text of the DNRC dissent. APPENDIX I

APPENDIX I

MEMBERS OF THE IPC AS OF JULY 28, 1999

American Bar Association—Intellectual Property Law Section—''ABA–IPL''

American Intellectual Property Law Association—''AIPLA''

Asian Patent Attorneys Association—''APAA''

American Society of Composers, Authors, and Publishers—''ASCAP''

Associacion Interamericana de la Propriedad Industrial—''ASIPI'' (*)

Association of American Publishers—''AAP'' (*)
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Broadcast Music, Inc.—''BMI''

Business Software Alliance—''BSA''

District of Columbia Bar Association—''DCBA''(*)

Domain Name Rights Coalition—''DNRC''

European Communities Trade Mark Association—''ECTA''

European Newspaper Publishers' Association—''ENPA'' (*)

Federation Internationale des Conseils en Propriété Industrielle—''FICPI''

Intellectual Property Institute—''IPI'' (*)

International Federation of Phonographic Industry—''IFPI''(*)

International Intellectual Property Alliance—''IIPA''

International Property Law Association of Chicago—''IPLAC''(*)

International Trademark Association—''INTA''

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Association of European Trade Mark Owners—''MARQUES''

Motion Picture Association—''MPA''

National Music Publishers Association—''NMPA''

New York Intellectual Property Law Association—NYIPLA'' (*)

Recording Industry Association of America—''RIAA'' (*)

Software & Information Industry Association—''SIAA'' (*)

(*) By written application to be reviewed by IPC Council

APPENDIX II

DESCRIPTIONS OF IPC MEMBERS AS OF JULY 28, 1999

American Bar Association Intellectual Property Law Section (''ABA–IPL'')

    Since 1894, the Section of Intellectual Property Law of the American Bar Association (''ABA–IPL'') has been committed to protecting intellectual property rights and has contributed significantly to the development and protection of these rights in the United States and abroad. The ABA–IPL, the largest intellectual property organization in the United States with over 17,000 members and associate members, is dedicated to keeping its membership informed of the latest developments in this ever-expanding field.
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American Intellectual Property Law Association (''AIPLA'')

    The AIPLA is primarily a U.S. based bar association with nearly 10,000 members engaged in private and corporate practice, in government service, and in the academic community. The AIPLA represents a wide and diverse spectrum of individuals, companies and institutions involved directly or indirectly in the practice of patent, trademark, copyright, and unfair competition law, as well as other fields of law affecting intellectual property. The AIPLA has active members in more than 20 countries as well as over 400 foreign affiliates from some sixty countries and monitors and comments on developments in IP law and practice in commercially important countries around the world.

The American Society of Composers, Authors and Publishers (''ASCAP'')

    ASCAP is the oldest musical performing rights society in the United States and holds the largest repertory of U.S. copyrighted musical works. It is a voluntary membership association with more than 82,000 members, representing owners of all genres of musical works. ASCAP is affiliated with fifty-eight foreign performing rights societies. ASCAP licenses on a non-exclusive basis the non-dramatic public performances of the repertory of its members and its affiliated societies to those individuals and entities which desire to make public performances of that music. ASCAP's licensees include, but are not limited to, commercial and non-commercial television and radio stations, concert halls, sports arenas and teams, hotels and airlines as well as colleges and universities and websites. ASCAP has always taken, and is committed to taking, an active role in representing and defending the public performance rights of its members internationally and domestically. ASCAP's President and Board Chair, Marilyn Bergman, just completed four years of service as the President of ''CISAC'' (the Confederation Internationale de Societies de Auteurs et Composeurs), which is an international confederation of almost all national performing rights organizations, and ASCAP's general counsel, Fred Koenigsberg, served as one of the private sector representatives to the WIPO Diplomatic Conferences.
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Associacion Interamericana de la Propriedad Industrial (''ASIPI) (*)

    ASIPI is an international organization mainly formed by Latin American Intellectual Property Practitioners, including also members from all around the world as well as in-house counsel from some major companies. The interests of all its members is the protection of intellectual property rights all around the world. It was founded in 1965 and it currently has over 800 active members. ASIPI's membership has increased largely over the past years, becoming the largest and most representative IP organization in Latin America.

Association of American Publishers (''AAP'') (*)

    AAP has 210 corporate members located throughout the U.S. and is the principal trade association of the book publishing industry. AAP members publish hardcover and paperback books in every field, including general fiction and non-fiction, poetry, children's books, textbooks, Bibles and other religious books, reference works, scientific, medical, technical, professional and scholarly books and journals, and classroom instructional and testing materials. AAP members also produce computer software and electronic products and services, such as on-line databases, CD–ROM, and CD–I. AAP's primary functions are to promote the status of publishing around the world, and to defend intellectual freedom at home and the freedom of written expression worldwide.

Asian Patent Attorneys Association (''APAA'')

    APAA was formed in 1969 with the three foundation members, Japan, Korea, and Taiwan. The Association has now extended to include membership from within the Asian region with 14 countries now represented and has a total individual membership in excess of 1400. The Association has as its main objective, to promote the intellectual property law systems within the region and to foster ties of mutual understanding between those practicing intellectual property within the Asian region.
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Broadcast Music, Inc. (''BMI'')

    Founded in 1940, BMI is an American performing rights organization that represents more than 200,000 songwriters, composers and music publishers in all genres of music. Through its music performance and reciprocal agreements, it grants businesses and media legal access to its repertoire of more than 3,000,000 musical works from around the world. BMI is an active participant in international organizations focusing on intellectual property issues. BMI licenses the public performance of its repertoire on radio, television, cable, the Internet and other media and in other businesses and establishments. BMI has taken a leadership role in representing, advocating, and defending the public performing right and the interests of songwriters, composers and music publishers. In January of 1999, Frances W. Preston, BMI's President and CEO, was honored as ''person of the year'' at the annual MIDEM Convention in Cannes, France—the highest international award accorded to music industry executives. Marvin L. Berenson, BMI's General Counsel, served as a member of the U.S. delegation to the WIPO diplomatic conference that produced two treaties in 1996 to meet the needs of the digital era.

Business Software Alliance (''BSA'')

    The Business Software Alliance promotes the continued growth of the software industry through its international public policy, education, and enforcement programs in 65 countries. BSA worldwide members include the leading publishers of software for personal computers including Adobe, Apple Computer, Autodesk, Bentley Systems, Corel Corporation, Lotus Development, Microsoft, Network Associates, Novell, The Santa Cruz Operation, Symantec and Visio. BSA's policy Council consists of these software publishers and other leading computer technology companies, including Apple Computer, Computer Associates, Compaq, Digital Equipment Corporation, IBM, Intel, Intuit, and Sybase. BSA operates more than 50 hotlines around the world for callers seeking information about copyright matters or reporting suspected incidents of unauthorized copying of software.
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District of Columbia Bar Association (''DCBA'')(*)

    The DCBA is an association of lawyers representing both domestic and foreign clients in intellectual property, trade and policy matters before various courts and before the executive and legislative branches of the U.S. government.

Domain Names Rights Coalition (''DNRC'')

    The DNRC represents the interests and views of entrepreneurs, small businesses and individuals on the Internet. The DNRC works for national and international policies which are fair and equitable to all users of the Internet, and which promote the Internet as a global medium of communication and free speech.

European Communities Trade Mark Association (''ECTA'')

    ECTA is an association of some 1,500 trademark professionals and attorneys, some working in industry and some in private practice. Full members have to be practising in one of the fifteen countries of the European Community, but membership is also open to affiliates and associates from any country in the world. Over 50 countries are currently represented in this way. ECTA acts as an informed spokesman on all problems relating to the protection and use of trademarks in the European Community, in particular the Community Trademark Regulation, the Community Trademark Office, the harmonization of national legislation with that of the EC, and the consequences arising from the exercise of national trademark rights in EC Member States.
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Federation Internationale des Conseils en Propriete Industrielle (''FICPI'')

    FICPI is an organization made up of over 4000 members from over 70 countries, all of whom are experienced intellectual property practitioners. The international group and its national associations regularly participate in national and international discussions in relation to all aspects of intellectual property.

The International Federation of Phonographic Industry (''IFPI'')(*)

    IFPI is the worldwide voice of the recording industry. Founded in Rome in 1933, IFPI has been active in developing and presenting the views of the world's major record companies, as well as those of hundreds of independent record companies, in numerous forums around the world. Currently, IFPI counts over 1,200 record companies, located in 70 countries, among its members. In addition, the national record industry associations of 44 countries are members of IFPI. IFPI is a strong supporter of intellectual property, as its members depend on the strong protection of copyright and trademark in order for them to invest in and distribute recorded music around the world. Consistent with this position, we strongly advocate the protection of copyright and trademark in on-line environments where the dangers to authors and rights owners from the lack of such protection are so severe. We have therefore followed the recent developments in the field of domain registration, including the WIPO process, with great interest and support the goals of these undertakings.

International Intellectual Property Alliance (''IIPA'')

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    The International Intellectual Property Alliance (IIPA) is a private sector coalition formed in 1984 to represent copyright-based industries—business software, films, videos, music, sound recordings, books nd journals, and interactive entertainment software—in bilateral and multilateral efforts to improve international protection of copyrighted works. IIPA is comprised of seven trade associations, each representing a significant segment of the U.S. copyright community.

International Property Law Association of Chicago (''IPLAC'')(*)

    IPLAC consists of over 900 members who are engaged in the practice of intellectual property law. Among the missions of the IPLAC is to ''aid in the development of the patent, trademark and copyright laws, the administration thereof, and the procedures in connections therewith.'' Because of the importance of domain names and the Internet in the field of intellectual property, the IPLAC are extremely interested in the activities of ICANN.

The International Trademark Association (''INTA'')

    INTA is a 120-year-old not-for-profit membership organization. Since the Association's founding in 1878, membership has grown from 17 New York-based manufacturers to approximately 3,700 members from the United States and 119 additional countries. Membership in INTA is open to trademark owners and those who serve trademark owners. Its members are corporations, advertising agencies, professional and trade associations, and law firms practicing trademark law. INTA's membership is diverse, crossing all industry lines and spanning a broad range of manufacturing, retail and service operations. All of INTA's members, regardless of their size or international scope, share a common interest in trademarks and a recognition of the importance of trademarks to their owners, to the general public, and to the economy of both the United States and the global marketplace.
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The Association of European Trade Mark Owners (''MARQUES'')

    The objectives of MARQUES are to assist European based brand owners in the selection, management and protection of their trade marks and to create a forum for the free exchange of ideas and information providing a platform for the representation of their interests. They have approximately 450 members in 75 countries.

The Motion Picture Association of America (''MPA'')

    The Motion Picture Association of America acts domestically as the voice and advocate of seven of the largest producers and distributors of filmed entertainment. MPAA's counterpart, the Motion Picture Association (MPA) serves the same purpose on an international basis. Founded in 1922 as the trade association for the American film industry, the MPAA has broadened its mandate over the years to reflect the diversity of the expanding motion picture industry. Today these associations represent major producers and distributors of entertainment programming for television, cable, home video, and looking into the future for delivery systems not yet imagined. Among its principle missions, the MPAA directs an anti-piracy to protect, through copyright and other laws, films in 72 countries around the world.

National Music Publishers Association (NMPA)

    NMPA is a trade association representing over 600 U.S. businesses that own, protect, and administer copyrights in musical works. For more than seven decades, NMPA has served—in the national and international arenas—as the eyes, ears, and voice of the American music publishing association. NMPA's wholly-owned subsidiary, the Harry Fox Agency, Inc. (HFA), acts as agent for more than 16,500 U.S. publishers in connection with the issuance of mechanical licenses, covering the majority of musical compositions contained in U.S. records, tapes, compact discs, and imported phonorecords. HFA also collects and distributes royalties for licenses it issues and audits them to ensure the accuracy of licensees' accountings. Through reciprocal representation agreements with similar collecting societies throughout the world, HFA provides these services to its publisher principals on a global basis. In addition, HFA often licenses on a worldwide basis on behalf of its publisher principals for use in films, commercials, television programs, and other types of audio visual media. Through its involvement in various international organizations including BIEM, an umbrella group of trade associations operating in over 80 countries, NMPA/HFA plays an active role throughout the world in protecting copyright interests of the U.S. music publishing industry.
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New York Intellectual Property Law Association (NYIPLA'')(*)

    One of the oldest intellectual property bar associations in the United States whose more than one thousand members are actively engaged in the protection of intellectual property assets in the U.S. and abroad.

Recording Industry Association of America (''RIAA'')(*)

    RIAA is a trade association that represents the companies that create, manufacture or distribute approximately 90 percent of the sound recordings in the U.S. With $14 billion in domestic sales and foreign sales of over $16 billion, U.S. recorded music represents approximately 60 percent of the world's consumption of music. The U.S. recording industry employs hundreds of thousands of workers at a variety of levels and produces a foreign trade surplus. The RIAA works to foster a business and legal climate that supports and promotes its members' creative and financial vitality around the world. Toward this end, the RIAA works to protect intellectual property rights worldwide and the First Amendment rights of artists; investigates the illegal production and distribution of pirated sound recordings; conducts consumer, industry and technical research; and monitors and reviews state and federal laws, regulations and policies and represents the music industry's interests before legislators. The RIAA also certifies Gold, Platinum, Multi-Platinum and Diamond? sales awards.

Software & Information Industry Association (''SIAA'') (*)

    SIIA is the principal trade association of the software code and information content industry. SIIA represents more than 1,400 leading high-tech companies that develop and market software and electronic content for business, education, consumers and the Internet. SIIA was formed on Jan. 1, 1999, as a result of the merger between the Software Publishers Association (SPA) and the Information Industry Association (IIA). Information on SIIA and its wide range of activities can be found at <www.siia.net>.
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(*) By written application to be reviewed by the IPCC.

    Mr. COBLE. Mr. Stubbs.

STATEMENT OF KEN STUBBS, CHAIRMAN OF THE EXECUTIVE COMMITTEE, INTERNET COUNCIL OF REGISTRARS (CORE)

    Mr. STUBBS. Thank you very much, Mr. Chairman. Good morning, all.

    A viable Internet allows competition be successful only if it can accommodate the goals of both the domain name system and intellectual property concerns. But we have instead found ourselves entangled in practices that has led to misleading use of domain names, misleading consumers and infringing on the rights of trademark owners. NSI's refusal to cooperate with ICANN has had serious effects on both the effort to introduce competition and on prospects for fair treatment for IP on the Internet.

    My testimony will address four points:

    Number one, cybersquaters and pirates have exploited the current NSI pay-later registration policy to tie up tens of thousands of domain names for months with no intent to pay. These abuses are significant in scope with, historically, almost one-third of the 500,000 domain names registered each month eventually being cancelled for nonpayment.

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    To address these abuses, ICANN policy requires accredited registrars to obtain reasonable assurance of payment, such as a credit card, before allowing registration to go active. NSI, however, has refused to adhere to this prepayment policy.

    Last week, NSI has announced that it will reform its practice by adopting a prepayment model. This claimed reform, however, appears to be entirely cosmetic. After issuing this announcement, NSI promptly wrote the reseller community offering to include their ''premier partners'' in a program where there ''will be no changes in the invoicing process'' used by NSI.

    This continuing unfair practice will ensure cyberpiracy continues unchecked, since the vast majority of these abusive registrations are made through resellers, not directly through NSI.

    The ''Whois'' system. We need to move quickly to ensure stability and integrity of the ''Whois'' system. To do this we must have access to accurate and up-to-date contact information about registered domain names. This information allows trademark owners to seek and correct infringing uses and also allows copyright owners to obtain information about domain names being used to distribute pirated content.

    Historically, members of the public could go directly to the ''Whois'' to review registration data. To further circumvent the process, NSI has now appropriated and redirected the U.S. Government-owned Internet service market to its own web site without commerce approval. Rather than having access to a complete list now, consumers only have access on this site to NSI's list, undermining confidence and hampering other company's efforts to introduction competition.
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    Another critical problem with the current ''Whois'' system is, in many cases, the contact information for domain names is inaccurate or out of date. ICANN's accreditation policy requires that we use reasonable steps to correct or update erroneous information. NSI's refusal to follow this policy has created additional destabilization here. The recent speaker net growth has resulted in confusion to the trademark community.

    To alleviate the trademark domain name dilemma, the White Paper called on WIPO to assist in the development of the DRP process to be presented to the interim board for its consideration. In April, WIPO submitted its final report which called for an ADR process for disputes resulting in abusive registrations. ICANN's board subsequently endorsed the principle and encouraged testbed registrars to work together to formulate a model policy until an ICANN-established policy can be implemented.

    We agree that a uniform policy among registrars for handling these disputes is needed. Any policy, though, in order to be truly effective, must include NSI's ascension to recognize it.

    In October 1998, Commerce granted a 2-year extension in exchange for NSI's promise to reengineer the system to allow competitive registrars. In April of this year, the beginnings of competition were introduced, but technical problems with NSI-designed SRS, as well as their uncooperative altitude toward ICANN, has delayed the implementation.

    The incumbent also claims it owns the data in the registry, even though it has maintained the registry for government under a cooperative agreement and has always been required to make it publicly available. This data is a public resource. All competing registrars should be granted equal access to this data, as NSI has previously promised that they would.
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    To date, the incumbent has kept literally 100 percent of all the existing registrants and has contractually prohibited competitive registrars from sending renewal solicitations to these customers while at the same time repeatedly sending bulk solicitation E-mails to these customers seeking to sell its own services. This is not only unfair competition, but it is also an unwarranted private claim to exclusive intellectual property rights in a database compiled for you.

    No less egregious was the appropriation of the government Internet web site.

    The Internet community has come together to minimize conflicts and IP interests and domain system and open competition in the marketplace. We are working on a dispute resolution policy that will serve the legitimate needs of intellectual property owners.

    I would like to thank you very much for the opportunity to speak before you, and I would also appreciate the opportunity to address a couple of concerns, one from Mr. Goodlatte and another from about Mr. Berman, if the time is appropriate.

    Mr. COBLE. Thank you.

    [The prepared statement of Mr. Stubbs follows:]

PREPARED STATEMENT OF KEN STUBBS, CHAIRMAN OF THE EXECUTIVE COMMITTEE, INTERNET COUNCIL OF REGISTRARS (CORE)
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INTRODUCTION

    My name is Ken Stubbs. I appreciate the opportunity to appear at this hearing. I hope to provide you today with the perspectives of Internet domain name registrars, which I bring to you in three capacities. I am associated with Domain Names International, a Florida-based company seeking to enter the domain name registrar business that is now being opened to competition. I am also Chairman of the Executive Committee of CORE, the Internet Council of Registrars, a not-for-profit association of more than 50 domain name registrars of all sizes, including my own and many others like it. Finally, I am one of three representatives to the ICANN Names Council who have been elected by the registrar constituency of the ICANN Domain Name Supporting Organization, also known as the ''DNSO.''

    For more than two years, CORE has been intimately involved in the entire Internet governance process. CORE's member companies come from more than 20 different countries but, in accord with the strength of America's influence in the Internet, the largest share of CORE registrars are U.S. companies with a presence in many American cities. Wherever CORE members might be located, however, they share a dedication to working cooperatively with the Department of Commerce and the entire Internet community to ensure a responsible transition from the past domain-name registration monopoly to a vibrant competitive environment that provides fair procedures for protecting businesses, intellectual property owners, and consumers alike from the abuses now present on the Internet.

    CORE and its members contributed extensively to the Green and White Papers, as well as the myriad of meetings and conferences leading to the creation of ICANN last fall. CORE members have participated fully in the evolving ICANN process, submitting public comments leading to ICANN's adoption of the registrar accreditation policy underlying the newly introduced competitive system and working with other segments of the Internet community to construct the participatory structures of the recently recognized ICANN DNSO.
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    The DNSO is responsible for formulating consensus-based recommendations on policy issues concerning domain names. It consists of seven different constituencies, including one for domain name registrars. The registrar constituency, which is open to all ICANN-accredited registrars, elects three representatives to the 21-member DNSO Names Council, which is responsible overall for managing the process by which domain name recommendations are formulated.

    In addition, CORE was chosen last April to be one of the five registrars to participate in the test bed for evaluating the NSI ''shared registration system,'' by which the Department of Commerce is introducing competition into the domain name registration business. In this regard, CORE is acting as a single registrar, but is dealing with the public through its various member companies. So far, 12 CORE members are committed to provide registration services through CORE. CORE has recently ''gone live'' actively registering domain names through five of its members, with the other seven participating CORE members to begin operations shortly.

OVERVIEW

    The subject of today's hearing is the relationship of Internet domain names and intellectual property rights and is one about which domain-name registrars generally, and members of CORE and of the DNSO registrar constituency in particular, are keenly interested. Registrars recognize that for their businesses to thrive in the long term the new competitive marketplace should be fashioned in a way that accommodates the goals of the Internet domain name system with those of the intellectual property system. With the introduction of competition, system-wide reform is needed of past practices on the Internet that have led to misleading use of domain names, confusing consumers and infringing the rights of trademark owners. The new competitive system should also ensure that accurate, up-to-date contact information is available for every domain name so that violations of copyrights and trademarks as well as technical problems can be quickly corrected. Finally, all participants in the new competitive environment should be given fair access to the existing registration base developed by a series of exclusive government contractors over the past thirteen years.
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    While the Internet community, through ICANN, has developed a system that would promote vigorous competition while accommodating intellectual property concerns, implementation of that system has been frustrated by the refusal of the incumbent government contractor, NSI, to recognize ICANN or to subscribe to the consensus-based ICANN policies. This refusal has had devastating effects both on the effort to introduce competition and on the prospects for fair treatment for intellectual property on the Internet. In my testimony, I will address four points: the need for a universal prepayment requirement; the need for a publicly available, accurate, up-to-date, and unified source of contact information about domain names; the need for a uniform domain-name dispute resolution policy; and the need for fair competitive access of the legacy registration base compiled for the government by NSI and prior government contractors.

PREPAYMENT

    Cybersquatters and cyberpirates have massively exploited NSI's pay-later registration policy to tie up hundreds of thousands of domain names for months with no intent to pay. They do this by sending NSI domain name registrations that copy the names of legitimate businesses and then ignoring the invoice for payment that often arrives from NSI weeks later. By the time NSI gets around to canceling the unpaid registration, many months have passed and in the meantime these speculators often openly offer to ransom these hostage names to the highest bidder. The more sophisticated cyberpirates prolong the hostage crisis by submitting new registrations for the same names immediately as their unpaid registrations are canceled.

    These abuses are truly breathtaking in scope, with 34% of the over 500,000 domain names NSI registers each month eventually being canceled for nonpayment. Because of these serious problems, the practice of pay-later registrations has long been condemned throughout the Internet community, except of course by the cyberpirates and by NSI itself, which benefits because pay-later allows NSI to expand its sales through impulse buying by customers not having access to credit cards or similar immediate payment vehicles.
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    To address these abuses, the ICANN registrar accreditation policy, which was adopted after extensive public input reflecting the broad community consensus, requires ICANN-accredited registrars to obtain a reasonable assurance of payment (such as a credit card) before allowing a registration to go active. NSI, however, has refused to become an ICANN-accredited registrar or otherwise to adhere to this prepayment requirement. The result is a significant competitive advantage for NSI, in that it alone offers customers the ability to register without having to provide a credit card or to wait for slower means of payment to clear. The effect of this NSI refusal to observe the same rules as other registrars is not only a destruction of effective competition but also continuation of the massive speculative abuses that NSI's pay-later policy promotes.

    Last week NSI issued a press release announcing that it will reform its practice by adopting a prepayment model. NSI's claimed reform is entirely cosmetic and does nothing to effectively combat the abuses caused by NSI's pay-later policy. After issuing this press release, NSI promptly wrote the reseller community offering to include NSI ''premier partners'' in a program where there ''will be NO CHANGES to the invoicing process'' currently used by NSI. By continuing its pay-later policy for resellers, NSI will have a vast competitive advantage over ICANN-accredited registrars, because only NSI can continue to have resellers sign up customers without requiring prepayment, instead allowing NSI to invoice the customers directly at a later date. This unfair competitive advantage will also ensure that cyberpiracy continues unchecked, since the vast majority of unpaid abusive registrations are being accomplished through NSI's resellers.

    In sum, the Internet community, including registrars other than NSI, recognize the need for and broadly support a prepayment requirement. If the ICANN process were allowed to work, prepayment would be a reality and cyberpiracy would be greatly reduced. But NSI has frustrated the process by refusing to become accredited. If there is to be a level playing field for competition and an effective means to stop cyberpiracy, NSI's refusal must come to an end.
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WHOIS SYSTEM

    Another important aspect of ensuring beneficial coexistence of the domain-name registration and intellectual property systems is the convenient availability on the Internet of accurate and up-to-date contact information about registered domain names. This information allows trademark owners to seek to correct infringing use of domain names and also allows copyright owners to obtain information about domain names being used to distribute pirated content. It is also necessary for technical reasons, to allow those operating computers on the Internet to work together to solve interoperability problems.

    By Internet tradition, public access to contact information about domain names has been provided by each top-level registry through a program known as ''WHOIS.'' Until recently, members of the public could go to the ''internic.net'' web site that NSI operated for the government under its cooperative agreement and determine the names and addresses of registrants as well as technical contacts and registration dates.

    In designing the shared registration system under which competition is to proceed, however, NSI significantly altered the way that WHOIS service is provided, so that under the current system public access is neither convenient nor, in the case of NSI-sponsored registrations, accurate and up to date. Under the NSI design, the WHOIS service is split into two levels, with a registry-level WHOIS provided at a new web site (www.nsiregistry.com) and with each registrar required to provide an additional WHOIS service. Users seeking information about a .com domain must now first go to the registry WHOIS, which provides only the identity of the registrar through which the registration was made, and then go to the appropriate registrar's WHOIS server to obtain information about the registrant and the domain name's contacts. This new procedure has resulted in extensive public confusion, which has been magnified because NSI concurrently redirected the internic.net web site to its own web site (without Commerce Department permission), so that users going to the formerly comprehensive government-sponsored WHOIS service now end up at a site that has only data about registrations made by NSI.
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    The ICANN-adopted registrar accreditation policy recognized this flaw in NSI's design of the shared registration system and provided a mechanism for a centralized WHOIS service operated by a neutral entity, with each accredited registrar providing its data. This mechanism, however, is not feasible at this time because NSI has refused to become an accredited registrar or to provide its registration data to a central database.

    Another problem with the current WHOIS system is that in many cases the contact information for domain names is inaccurate or out of date. This obviously presents problems for intellectual property owners as well as for those needing ready access to operational information. The Internet community generally recognizes these deficiencies and, and a result, ICANN's registrar accreditation policy requires registrars to take reasonable steps to correct or update erroneous information when it is called to their attention. Although the accredited registrars understand the need for, and do not object to, this requirement, NSI's refusal to become accredited and follow the policy precludes effective correction of contact data for the large majority of registrations that NSI will continue to sponsor.

DISPUTE RESOLUTION

    As recognized in the White Paper, the Internet has resulted in challenges to the trademark system. Domain names have taken on a commercial significance in addition to their role as technical identifiers. Many trademark-based disputes, some involving legitimate claims on both sides and others involving abusive cybersquatting or cyberpiracy schemes, arose.

    To alleviate the trademark/domain-name dilemma, the White Paper called on the World Intellectual Property Organization to ''to convene an international process including individuals from the private sector and government to develop a set of recommendations for trademark/domain name dispute resolutions and other issues to be presented to the [ICANN] Interim Board for its consideration as soon as possible.''
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    After an extensive consultation process, on April 30, 1999, WIPO submitted to ICANN its final report which called for an administrative dispute-resolution process for domain-name disputes resulting from cybersquatting, cyberpiracy, and other types of ''abusive registrations.'' On May 27, at its next quarterly Board meeting, ICANN endorsed the principle of a uniform dispute resolution policy among registrars in the .com, .net, and .org top-level domains and referred the WIPO report to the ICANN DNSO for recommendations on the provisions of such a policy. The ICANN Board also encouraged the test bed registrars to work together to formulate a model dispute resolution policy for voluntary adoption until the DNSO can complete its work and an ICANN-established dispute policy can be implemented.

    CORE and, by my observation, the ICANN-accredited registrars generally, agree that a uniform policy among registrars for handling domain disputes is needed. Although registrars want to engage in fair, heads-up competition, introducing a multitude of different dispute policies into a single top-level domain not only would create pointless confusion but also threatens disastrous results for trademark holders as cybersquatters and cyberpirates shop around from registrar to registrar for the dispute policy that permits the most abusive registration tactics.

    The registrars are anxious for the Internet community, through the ICANN process, to come to consensus on what the uniform policy should be. The ICANN DNSO has formed a working group that is actively engaged in developing consensus recommendations. Responding to ICANN's encouragement of voluntary efforts in the meantime, the test bed registrars have jointly drafted a model policy based on the WIPO recommendations. Several of the test bed registrars (including CORE) plan to adopt that policy in the very near future, once final revisions are made to account for recent comments.
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    As you can see, using the ICANN process, the Internet community has risen to the challenge to formulate a uniform policy that fairly resolves domain name disputes. That policy, however, will have limited application unless and until NSI recognizes ICANN and becomes accredited, so that it operates by the same rules as all other registrars.

ACCESS TO LEGACY REGISTRATION BASE

    In 1993, NSI took over the .com, .net, and .org registry database from the prior government contractor, SRI. In the ensuing six years, NSI has accepted registrations from the public and maintained the database through the government-sponsored ''Internic'' service. Until 1995, NSI was paid directly by the government for the Internic services; since then Internic has been funded by fees that the government has allowed NSI to charge registrants.

    In October 1998, when NSI's cooperative agreement for Internic would have expired, the Department of Commerce granted NSI a two-year extension in exchange for NSI's promise to reengineer its system to allow competitive registrars, accredited by ICANN, to have equal access to the registry. As I have mentioned, in April of this year the beginnings of competition were introduced through the opening up of the registry to five ICANN-accredited registrars, including CORE. Because of technical problems with the shared registration system designed by NSI, as well as a predictably uncooperative atmosphere between NSI and the test bed registrars, actual competition has been considerably delayed. However, four of the five registrars, including CORE, are now actively selling registrations in competition with NSI. The result has not only been lower prices—one CORE member has dropped the price for a two-year registration from $70 to $50—but also much more convenient and user-friendly registration services.
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    But true competition requires a level playing field and equal access to the registry. This has been thwarted as NSI uses misplaced intellectual property claims to gain preferential access to existing and future registrants.

    NSI claims it owns the data in the .com registry, even though it has maintained the registry for the government under a cooperative agreement, has always been required to make it publicly available, and, indeed, inherited the registry data in 1993 from the prior government contractor. This data should be viewed as a public resource, not a proprietary database owned by NSI. All competing registrars should be granted ''equal access'' to this data in the registry, as NSI promised last October when it got the two-year extension. Yet NSI has kept all the existing customers, has the only bulk access to data about these customers, has contractually prohibited competitive registrars from sending renewal solicitations to these customers, and has itself repeatedly sent bulk ''spam'' e-mails to these customers seeking to sell its services.

    This not only is an unfair tilt of the competitive playing field toward the monopolist, but it also is an unwarranted private claim to exclusive intellectual property rights in a database compiled for the government under contract. Akin to this, NSI also grabbed public property when it hijacked the internic.net web site, which has long been associated with the government-sponsored Internic registration service (Internic is a registered trademark of the U.S. Government), and redirected that site to NSI's own web site (www.networksolutions.com). Unless this appropriation by NSI of the government's intellectual property is corrected, there will never be a level competitive playing field, and the public will never be able to enjoy the benefits of full and fair competition.

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CONCLUSION

    The Internet community has come together through ICANN to adopt consensus-based procedures that will minimize conflicts between intellectual property interests and the domain-name system. ICANN's DNSO and the ICANN-accredited registrars are working on a dispute resolution policy that will serve the legitimate needs of intellectual property owners, the public, and business alike. These efforts, however, have been effectively thwarted by NSI's refusal to participate constructively in the ICANN process and to become accredited so that it operates under the same rules as its competitors. Instead, NSI has sought to stall the introduction of effective competition by making spurious claims of ownership in publicly owned intellectual property and by adhering to its own policies that provide it unfair competitive advantages, while wrecking significant harm on the intellectual property of others.

    Mr. COBLE. Ms. Karg.

STATEMENT OF KATHLENE KARG, DIRECTOR OF INTELLECTUAL PROPERTY AND PUBLIC POLICY, INTERACTIVE DIGITAL SOFTWARE ASSOCIATION, ON BEHALF OF COPYRIGHT COALITION ON DOMAIN NAMES

    Ms. KARG. Thank you, Mr. Chairman.

    As the chairman kindly noted, I am testifying this morning on behalf of the Copyright Coalition on Domain Names——

    Mr. COBLE. Ms. Karg, pull that mike a little closer to you, if you will.
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    Ms. KARG. Yes, sir—of which the Interactive Digital Software Association is a founding member. The CCDN brings together the representatives of copyright owners in music, sound recording, audio-visual materials, text products, as well as business and entertainment software.

    Copyright owners have a vital stake in the domain name system. We need to be able to register domain names quickly and efficiently and are concerned with cybersquatting issues, which have been already raised here today.

    But copyright owners have unique vulnerabilities. On-line piracy not only tarnishes our marks but usurps our markets. The problem is growing.

    For example, an estimated 50,000 sites offer access to pirated entertainment software products at any given time. As currently configured, the DNS provides tools for fighting on-line piracy. These tools, notably the ''Whois'' database and related directory services, must be preserved and strengthened.

    Through free, unfettered, real-time access to ''Whois'' and other directory services associated with the domain name system, copyright owners and their representatives can quickly identify the Internet service providers which host pirate sites or provide connections to them. This enables enforcement actions and demands that unauthorized sites obtain licenses.

    It also allows copyright owners to use the ''notice and take down'' procedure provided by the Digital Millennium Copyright Act to encourage Internet service providers to cut off access to pirate activities. The DMCA cannot function as contemplated if access to the ''Whois'' data is impeded.
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    Congressional oversight and executive branch vigilance are needed to ensure that the vital anti-piracy functions of ''Whois'' and the related elements of the domain names are maintained and strengthened. Free, real-time, unfettered public access to directory data must be preserved; and registrars must do more to improve data quality.

    I would like to take this opportunity, if I may, to show the subcommittee two examples of how the copyright industries use the ''Whois'' database on a daily basis to fight on-line piracy.

    There are two general types of sites that traffic in pirated copyright materials, Worldwide Web pages, which we are all familiar with, and File Transfer Protocol or FTP sites. Pirates use both, although pirates using FTP sites tend to have more illegal files on their sites than found on typical pirate web sites.

    This is an example of a pirate web site. Notice here that this site offers pirated music, software and text products.

    Here is the universal record locator or the URL for this particular site. This tells us that the second level domain name for this site is tripod.com. The next step in our process to find the pirate behind the site is to go to the NSI web page and initiate a ''Whois'' search by clicking here. We insert tripod.com into the field and initiate the search. The ''Whois'' database search results in the following information, which we then use to contact the administrative contact of the ISP, usually via e-mail. It is only at this point in the process that we are able to take advantage of the notice and takedown procedures as codified by the DMCA.
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    Obviously, the ''Whois'' data directory is fundamental to the process of notice and takedown. The whole process of investigation and notification can only take a few minutes when using these tools. In an era when pirate files can be distributed and copied in seconds, fast access to this information is essential to thwart piracy.

    In a case where a pirate is not using a web page but rather an FTP site, one additional step is necessary before we start the ''Whois'' database process that I just led you through. In this case the FTP site does not have a second level domain name readily presented, but rather it has a numeric IP address displayed. In such a case, we must first use a directory such as NS Lookup, that we are using here, to search for the domain names in this zone file. The resultant page of the zone search indicates that the URL for this FTP site is this particular address. Thus we know that the domain name for this site is home.com. Using the ''Whois'' database again, we can quickly find the administrative contact for the home.com domain name and can contact them regarding this infringing site.

    As you can tell, hopefully, by this abbreviated demonstration, the copyright industry's online enforcement efforts rely on the real time access to ''Whois'' and similar directories. This access and the accuracy of the information in the directory is crucial to our efforts to protect our copyrights. If access is limited or if the information supplied is false, IP owners have little recourse to combat these pirate sites in a fast and effective manner.

    I hope that this presentation has aided the subcommittee in understanding why the copyright industries are so concerned about the availability and accuracy of the information found in these directories. I thank you for the opportunity to share this information with you today, and I look forward to any questions that you may have on these topics.
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    [The prepared statement of Ms. Karg follows:]

PREPARED STATEMENT OF KATHLENE KARG, DIRECTOR OF INTELLECTUAL PROPERTY AND PUBLIC POLICY, INTERACTIVE DIGITAL SOFTWARE ASSOCIATION, ON BEHALF OF COPYRIGHT COALITION ON DOMAIN NAMES

SUMMARY

    Copyright owners have a vital stake in the Domain Names System (DNS). We need to be able to register domain names quickly and efficiently, and as major trademark owners, we are concerned about cybersquatting issues. But copyright owners have unique vulnerabilities: online piracy not only tarnishes our marks, it also usurps our markets. The problem is growing: for example, an estimated 50,000 sites offer access to pirate entertainment software products at any given time. As currently configured, the DNS provides tools for fighting online piracy. These tools—notably Whois and related directory services—must be preserved and strengthened.

    Through free, unfettered, real-time access to Whois and other directory services associated with the DNS, copyright owners and their representatives can quickly identify the parties responsible for operating pirate sites, and the Internet service providers which host or connect to them. This enables enforcement actions, and demands that unauthorized sites obtain licenses. It also allows copyright owners to use the ''notice and take down'' procedure provided by the Digital Millennium Copyright Act (DMCA) to encourage ISP's to cut off access to pirate activity. The DMCA cannot function as contemplated if access to Whois data is impeded. Nor can online commerce thrive without the accountability to consumers that Whois provides.

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    There are two main threats to the continued viability of Whois as an anti-piracy tool. Restrictions on access to and use of directory data, whether by licensing restrictions or by allowing registrars to withhold data under ''anonymous registration'' or ''opt-out'' schemes, would erode the value of Whois, and would help pirates. In addition, more must be done to improve the quality of Whois contact data, which is often bogus.

    Copyright owners have raised these data availability and data quality issues with NSI, with ICANN and with the new registrars in .com, .net, and .org, with mixed results. NSI was persuaded to drop plans to restrict access to Whois, and lifted restrictions on how Whois data can be used, but has been less responsive on data quality issues. ICANN incorporated some protections for Whois in its Registrar Accreditation Agreement, but implementation has been problematic, and enforcement of the obligations of the new registrars remains a question mark. ICANN and the five new testbed registrars must ''get it right'' before any further expansion of competition can be implemented.

    Congressional oversight and Executive Branch vigilance are needed to ensure that the vital anti-piracy functions of Whois and related elements of the DNS are maintained and strengthened. Free, real-time, unfettered public access to directory data must be preserved, and registrars must do more to improve data quality. Similar policies must apply in all Top Level Domains (TLDs). Further change to the DNS, including new TLD's, should not outrace the pace at which these essential goals can be accomplished.

STATEMENT

    Mr. Chairman, and members of the Subcommittee:
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    My name is Kathlene Karg, and I am the Director of Intellectual Property and Public Policy for the Interactive Digital Software Association (IDSA). The IDSA represents 90% of the U.S. publishers of interactive entertainment software for all platforms, including personal computers, the Internet, and video game consoles. The U.S. entertainment software industry had over $5.5 billion in U.S. sales in 1998, with billions more in export sales. In 1999, our industry will have a fourth straight year of double-digit growth, with current projections estimating $6.5 to $7 billion in U.S. sales. For comparison's sake, this is roughly equivalent to U.S. movie box office sales.

    I am testifying this morning on behalf of the Copyright Coalition on Domain Names (CCDN), of which the IDSA is a founding member. The CCDN brings together the representatives of copyright owners in music, sound recordings, audio-visual materials, and text products, as well as business and entertainment software. A list of organizations participating in the CCDN is attached to my statement.

    This Subcommittee is already very familiar with the economic impact of the copyright industries: that they represent one of the largest and fastest-growing segments of the U.S. economy, responsible for some 3.5 million U.S. jobs and nearly $280 billion in contributions to the Gross Domestic Product. You also well know how threatened these industries are by copyright piracy, and particularly by piracy carried out over the Internet. The main asset of every copyright industry is intellectual property, and if we cannot defend that property against misappropriation and theft, the underpinnings of this economic success story are directly threatened.

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    What is often overlooked or misunderstood is the essential role played by the Domain Name System (DNS) in helping to fight back against Internet copyright piracy. That is why we are particularly appreciative of the chance to explain this role this morning. CCDN urges the subcommittee to ensure that this role is preserved and strengthened, even as the DNS undergoes dramatic changes in competition and governance.

I. The Domain Name System: What's at Stake for Copyright Owners?

    The copyright industries have a vital interest in the efficient functioning of the Domain Name System (DNS) in several ways. Copyright owners operate thousands of web sites that we use to promote, market, and—increasingly—to deliver and transmit to the public, and allow them to use, every kind of copyrighted material. The online delivery of copyrighted materials is becoming a crucial distribution mechanism throughout the copyright industries. In the interactive entertainment segment, for example, websites are increasingly integrated into copyrighted products themselves, as with sites for interactive play of computer games over the Internet. So copyright owners are heavy users of the DNS, and need to be able to register second level domains (SLD's)—the handle just to the left of ''.com,'' for example—quickly, reliably, and at a reasonable cost.

    Copyright-based companies own a substantial number of trademarks, trade names, service marks, slogans, character names and titles throughout the world, and thus are vulnerable to cybersquatting, warehousing, and other types of trademark infringement, dilution or tarnishment if SLD's are registered without proper safeguards or if dispute prevention and settlement procedures are deficient. Thus, we share many of the concerns that you are hearing today from trademark-based groups about these issues
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    But more than any other economic sector, copyright owners are uniquely vulnerable to the potential of crippling economic harm, through cyberpiracy, if the DNS is not well administered. Of course, a domain name abuser can weaken, tarnish or dilute any company's marks; but when the target is a copyright owner, the domain name abuser can also usurp some or all of the market for the company's product. A brand name like Toyota, Fiat or Cadillac can be undermined through laxity in DNS administration; but realistically it is not yet possible to distribute automobiles over the Internet. By contrast, pirated copies of hit videogames, popular songs or recordings, current movies, and the best-selling computer programs or books can increasingly be found on, and downloaded from, the sites of domain name thieves, or even from sites whose names do not directly threaten trademark interests.

    Let me remind the subcommittee of the scope of the online problem that the copyright industries face. IDSA estimates that, at any given time, there are at least 50,000 active Internet sites where pirate copies of entertainment software products are accessible. It's no wonder that the economic losses due to online piracy threaten to dwarf the estimated $20–22 billion that the International Intellectual Property Alliance estimates the industry loses annually to off-line piracy worldwide. This trend is a major impediment to the development of electronic commerce, and if left unchecked will threaten the viability of the World Wide Web itself as a venue for global business.

    Because of this unique vulnerability to online piracy, copyright owners are concerned not only about how the DNS can facilitate the promotion, marketing, transmission and distribution of legitimate product, but also how it can be used to fight the accelerating trend toward online digital piracy. In fact, the DNS can be so used, and it is being so used, every day. As currently configured, the DNS helps copyright owners and their representatives to rapidly and efficiently identify, pursue and shut down Internet sites involved in piratical distribution, public performance, and other infringing activities with respect to copyrighted works. Every pirate site has an address; and virtually every address can be linked to information about the party who registered the site, who hosts it, or who provides connectivity to it.
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    The key DNS tool that copyright owners use to obtain this information is called ''Whois''. The challenge we face today is to preserve and strengthen this tool. Let me explain to the subcommittee how copyright owners and their representatives use Whois to fight online piracy.

II. How Copyright Owners Use Whois

    In the years since the Internet became a viable and widespread communications medium, Whois has been provided by the entity operating the registry for Top Level Domains (TLDs). (In the case of the leading generic TLD's—.com, .org, and .net—that entity is Network Solutions, Inc., or NSI.) Whois allows free, unfettered public access to essential information submitted by domain name registrants on their domain name registration form. Today, Whois is available 24 hours a day, 7 days a week, without charge, to anyone with access to the Internet. A Whois search is easy to undertake and usually requires just a few seconds. For every Second Level Domain (e.g., ''xyz.com''), a Whois search provides individual contact data for technical and administrative contacts, and may identify the computers which host the Web Site or through which access to it must flow. All this information is contained in the registration form submitted (and later updated) by the domain name registrant. Sometimes copyright owners must also use directory services other than Whois. For example, when pirate sites are identified only by a numeric Internet Protocol address, rather than by the letters making up a domain name, a database called the zone files must be searched. But Whois is nearly always an essential element of the strategy used to identify the operator of a pirate site and the Internet service provider (ISP) that hosts it or provides connectivity to it.

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    Armed with this information, copyright owners or their representatives can use Whois data in a number of ways. Sometimes the site operator is approached directly, with a demand that piratical activity cease. In the case of unauthorized public performances and other uses of musical compositions, the major organizations representing copyright owners (ASCAP, BMI and the Harry Fox Agency) generally contact the site operator and offer him a license to cover those performances or uses, which provides a means for the operator to avoid further liability. Sometimes Whois data is used primarily to correlate the activity at one pirate site with another that may be registered by the same or a related entity. This information is compiled for later use in civil or criminal enforcement proceedings, including settlement discussions. But perhaps the most important use of Whois data is of particular interest to this subcommittee, because it enables the operation of a key element of the path-breaking copyright legislation which you originated in the 105th Congress: ''notice and take down'' under the Digital Millennium Copyright Act (DMCA).

    In the DMCA, Congress created a non-judicial procedure aimed at quickly cutting off Internet access to sites where piratical activity is taking place. This ''notice and takedown'' procedure, set forth at 17 U.S.C. 512, typically begins when a copyright owner (or its representative) notifies an Internet service provider of piratical activity taking place on a site which the ISP hosts or to which it provides connectivity. If the ISP responds expeditiously to this notice by cutting off access to the site in question (or to the portion of it containing the pirate material identified by the copyright owner), it can then take advantage of limitations on remedies to which it might otherwise be subject if it were found liable for infringement (notably, no monetary relief can be awarded, and injunctive relief is curtailed). The DMCA also immunizes the ISP from any liability that might derive from a good faith decision to ''take down'' material in response to a copyright owner's notice.
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    The DMCA's notice and take down procedures essentially codify informal arrangements under which, for years, copyright owners and service providers have cooperated to remove or restrict access to pirate material on the Internet. While not legally mandated for either party, notice and take down can be an effective, efficient means by which copyright owners and service providers cooperate to combat Internet-based piracy.

    However, the DMCA's notice and take down procedure cannot work unless copyright owners can quickly and reliably determine the identity of the ISP to which they should direct their notice. That's where Whois and the other DNS directory services (like the zone files) come in. For a particular second level domain or other site, Whois quickly and reliably identifies the ISP to whom a DMCA notification should be directed in order to start the notice and takedown procedure. Without Whois, it would be much more complicated, expensive and slow for copyright owners to find out who is the proper recipient of a DMCA notification.

    So long as copyright owners, like other Internet users, retain free, unfettered, real-time access to the full range of registrant data contained in Whois, they will be able to invoke the notice and take down procedure under the DMCA as soon as they locate a site where piratical activity is taking place. Under these circumstances, the non-judicial, cooperative method of fighting Internet piracy that Congress codified in the DMCA can be followed. However, if public access to Whois is restricted in any way, the viability of the DMCA notice and take down procedure could be seriously undermined, and Congress' intent in enacting the DMCA would be frustrated.

    While the current system for identifying the operators of pirate sites and their associated ISP's, based on Whois, has some weaknesses and shortcomings, at least it provides an avenue that copyright owners and their representatives can and do use in their efforts to fight piracy on the Internet. Free and unfettered access to Whois also promotes other vital legal interests. For example, to combat fraudulent schemes online, consumers need ready access to Whois and similar databases so that they can establish the identity and bona fides of the operator of a site with which they are considering doing business, and so they can seek redress from unfair business practices if they do occur. Whois adds an essential ingredient—accountability—to the recipe for Internet-based electronic commerce. If access to Whois is restricted or cut off, copyright owners will not be the only parties whose vital interests are injured.
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III. Threats to Whois

    Copyright owners have identified two main categories of threats to the viability and usefulness of Whois: restrictions on data availability, and problems with data quality. Let me explain each of these briefly before discussing our recent experiences with NSI, ICANN and the new registrars.

    Whois works for copyright owners because it provides unfettered access to a comprehensive database of registration information. If restrictive conditions are placed on our access to this data, or if some of this data is locked up and excluded from access, then the value of Whois is seriously eroded. Both of these negative changes have been proposed recently.

    As discussed below, NSI has discussed making Whois access, even for individual queries, subject to a licensing system, and has attempted to impose unilateral restrictions on what members of the public can do with data that is returned in response to a Whois query. We see absolutely no justification for making such drastic changes to the way Whois has always operated. Fortunately, NSI appears to have retreated from these radical positions, but this issue certainly could arise again, either with NSI or with other domain name registries or registrars.

    There have also been some proposals to allow domain name registrants to ''opt out'' of Whois access to the data they submit as part of the registration process, or even to allow ''anonymous'' registration schemes in which the actual SLD registrant would hide behind some surrogate. Such schemes threaten the integrity of Whois and would compromise its usefulness to all members of the public who can and do benefit from it. The asserted privacy concerns underpinning these proposals seem mostly speculative; Whois has operated for years without any noticeable adverse impact on privacy. The ''opt-out'' and ''anonymous registration'' proponents also overlook the other mechanisms, such as use of an SLD operated by a web-hosting service, that individuals can already use to protect their privacy without undermining the public accountability factor that Whois provides. While for the time being Whois data remains freely available, proposals to shut off access to Whois data on privacy grounds are sure to recur, and must be approached with great caution. We must recognize that such restrictions are sure to benefit pirates, cybersquatters, scam artists, and others who would be far freer to carry out illegal online activities under a cloak of anonymity.
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    The second main threat to Whois reflects a problem that copyright owners have experienced with the current Whois system: data quality. Often, the administrative and technical contacts that are listed on the domain name registration form—and that copyright owners can access through Whois—are inaccurate, outdated, or just plain bogus. Smart pirates have learned that their identities and locations can be discovered through Whois, so they supply false information to frustrate the operation of the system. There are a number of steps that can be taken to address this problem, including requiring pre-payment for registration of second level domains; instituting automated protocols to screen registration data for obviously false entries, and for confirming that contact data remains current; and establishing procedures for acting promptly upon third party notifications of inaccurate contact data. In contrast to the issue of Whois data availability, where the challenge is to maintain the current policy of unfettered access and use to a comprehensive database, here the goal must be to improve Whois data quality from current levels in order to maximize its usefulness to members of the public.

IV. NSI and Whois

    As I have mentioned, until recently the only source of Whois data for the .com, .net and .org domains was NSI, which operates the registry for those domains. Copyright owners, and Internet users in general, have benefited greatly from the free, unfettered access to Whois and other directory data that NSI has provided. With the advent of competition in the domain name registration business and privatization of the whole domain name system, NSI has been faced with the prospect of sweeping changes, and from the viewpoint of the copyright industries, NSI's reaction to change has not always been positive.

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    Since late last year, there have been several unannounced and somewhat disruptive changes in the NSI-provided interfaces for conducting Whois searches. Even more troubling, NSI indicated on a number of occasions that it might abandon its long-standing policies and begin to restrict either access to Whois (and other directory databases) and/or use of the results of searches of these databases. Indeed, last spring, language suddenly appeared on the search and results screens for NSI's Whois service, prohibiting Whois searchers from copying their search results, transferring them, or making any use of them ''for any commercial purpose,'' without obtaining prior express written permission from NSI. Obviously, such a restriction, if enforced, would have crippled copyright owners' ability to use Whois to protect their copyrights. This unilateral assertion of control over Whois search results was completely unacceptable to the copyright industries, and we told NSI so.

    To NSI's credit, I believe that they heard our message on this point. The offending language was removed from the Whois screens, and replaced by language that we believe recognizes that any member of the public is free to query the Whois database, and to use the results of the query, for any lawful purpose, other than for compilation, repackaging or dissemination of the entire database, or of a substantial part of it. This means that queries—by copyright owners and others—to determine who is responsible for activities on specific World Wide Web sites may proceed freely. We have encouraged some of the new registrars for .com, .net and .org to adopt a similar policy.

    Our experience with NSI has been less rewarding with regard to improving Whois data quality. We are quite concerned about how slow NSI has been to implement a requirement that registrants pay their registration fees at the time of registration. Virtually everyone who has studied the DNS has concluded that a pre-payment requirement will reduce the incidence of bogus contact data submissions by registrants, as well as cybersquatting. NSI has told us repeatedly for several months that they will require registrants to pre-pay for their domain names, but they did not publicly announce such a policy until last week, and we are still waiting to see how it will be implemented in September. NSI has also dragged its feet on our request that they undertake other steps to screen out phony registrant contact data.
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    The Copyright Coalition on Domain Names is continuing its dialogue with NSI, with two goals: to assure that Whois and other directory data remains freely and readily available without restriction, and to encourage NSI to make needed improvements in the quality of registration data, which is reflected in the Whois database.

V. ICANN and the new registrars

    The copyright industries have also been deeply involved with the efforts in recent months by the Internet Corporation for Assigned Names and Numbers (ICANN) to initiate competition in the registration of domain names. ICANN sets the ground rules for the operation of these new registrars through Registrar Accreditation Agreements which each new registrar must sign. These agreements require each registrar to ''provide public access on a real-time basis (such as through a Whois service)'' to specified contact data submitted by registrants.

    CCDN made a number of suggestions for changes to the Accreditation Agreements that would have strengthened this obligation to make Whois data freely available, and that would have imposed minimal standards on registrars regarding the quality of Whois data. While some of these suggestions were accepted, others were not. Now that some of the testbed registrars have begun operation and are registering domains in .com, .net and .org, the shortcomings of the Registrar Accreditation Agreement have become even more evident. We also must confront the issue of whether and how ICANN will compel the new registrars to live up to even the minimal data availability and data quality obligations that are contained in these agreements. Let me give just a few examples:

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 The Whois service operated by CORE, one of the testbed registrars, is not accessible to World Wide Web users employing the most widely available browsers. Only users of the Unix operating system or those employing a ''whois client tool'' can gain access to data on registrations processed by CORE. The CORE Whois page, www.corenic.net/whois.htm, states that ''CORE will start offering a web-based Whois service in the near future.'' This is a flagrant violation of CORE's obligations under the Accreditation Agreement it has signed with ICANN.

 It does not appear that any of the testbed registrars has a procedure in place for receiving and acting promptly upon complaints from third parties that registrants cannot be contacted using the contact data they submitted at the time of registration. When copyright owners discover bogus contact data associated with a pirate site, we promptly bring that to the attention of the registrar and ask that the registration be cancelled and the site removed from the DNS directory. The Registrar Accreditation Agreement provides for this procedure, but the new registrars do not seem to have implemented it.

 Perhaps the most disturbing aspect of ICANN's administration of the competitive registration testbed is that the five new registrars have been allowed to ''go live'' without having any dispute resolution policies in place, much less a policy that is uniform across registrars. When copyright owners have tried to get one of the new registrars to place on ''hold'' a registration of a second level domain that was identical to a famous mark, the response was confusion, misinformation, and ultimately inaction. This is a virtual invitation to cybersquatters and pirates to flock to the new registrars in order to escape any accountability. A related unresolved issue involves the scenario in which a registrant seeks to register a domain name with one registrar as soon as the registration of the same name is challenged under the dispute resolution policy of another registrar. The Provisional Names Council of the DNSO has been asked to adopt safeguards against such ''forum shopping'' by registrants, but so far none are in place.
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    We recognize that some of the problems that have been encountered with the testbed registrars can be chalked up to ''growing pains.'' ICANN and the new registrars are both charting new trails, under rather adverse and contentious circumstances, and so it is not surprising that it may take a little while to work out the glitches in the availability and the quality of Whois and other directory data. However, we think these issues must be taken seriously for two reasons.

    First, the online environment is not forgiving of even short delays in ''getting it right.'' Copyright owners, in particular, are vulnerable if a pirate site can operate freely for even a few days; in that time, countless perfect pirate copies of works in digital formats can be disseminated and can populate other sites all around the globe. If we cannot locate the operators of that site, or the ISP providing connectivity for it, because the site is registered with a registrar who doesn't provide a Whois service, the damage in just a few days can be enormous.

    The second factor that demands that ICANN and its accredited registrars ''get it right'' immediately with regard to Whois is the impending expansion of competition in the registrar business. When five new registrars in three countries have stumbled so badly out of the starting gate, the prospect of more than 50 additional registrars, based in half a dozen additional countries, is alarming to copyright owners. With regard to competition, ICANN seems to be under pressure to ''get it done.'' Instead, its goal should be to ''get it right,'' even if that means that pre-conceived deadlines for rolling out competition must be relaxed.

Conclusion—Next Steps
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    Whois and associated directory services are vital tools for copyright owners seeking to combat the growing plague of online piracy. We urge the subcommittee to exercise vigorous oversight to make sure that these tools remain strong and indeed are improved. The U.S. government, acting through the Department of Commerce, is in a position to make this happen. In the gradual disengagement of the U.S. government from management of the DNS, preserving and enhancing free, unfettered access to the full range of Whois and directory data, and improving Whois data quality, should be cardinal principles, and that disengagement should proceed no more rapidly than is prudent to ensure that these principles are fulfilled. The immediate challenges ahead include the following:

 Ensuring that contact data for all generic TLD registrants remains fully available to all members of the public, online, in real time, and without restrictions on use. Whether Whois is centralized at the registry level, or operated by each individual registrar with an efficient system for routing queries through a single contact point, both NSI and their new competitors must maintain open availability of this crucial data.

 Ensuring that all gTLD registrars (incumbent and new entrants) take reasonable steps to improve Whois data quality, including implementing registration pre-payment requirements, automated contact data screening and checking protocols, and efficient procedures for acting promptly upon third-party notifications of inaccurate registrant contact data.

 Encouraging country code TLD administrators to adopt Whois policies similar to those applicable to the gTLD's, lest the ccTLD's become a haven for piracy.

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 Condition the adoption of new gTLD's on full implementation of the preceding three points throughout the gTLD's and ccTLD's, including an adequate period for evaluating and fine-tuning Whois data availability and data quality policies.

    Mr. Chairman, thank you for this opportunity to present the views of copyright owners and their representatives on these important topics.

    Mr. COBLE. Thank you.

    Mr. Kirk.

STATEMENT OF MIKE KIRK, EXECUTIVE DIRECTOR, AMERICAN INTELLECTUAL PROPERTY LAW ASSOCIATION (AIPLA)

    Mr. KIRK. Thank you, Mr. Chairman. The AIPLA has been vitally concerned about the impact which cybersquatting and cyberprivacy have on the protection of intellectual property. We therefore welcomed the government's call to WIPO to develop recommendations for a uniform approach to resolving trademark domain name disputes, protecting famous trademarks, and evaluating the effects on intellectual property owners of adding new gTLDs. We strongly endorse WIPO's recommendations. Though some may differ with respect to the specific details, the time for debate is past and the time for action is now.

    AIPLA wants ICANN to succeed, however, we note that no one on the ICANN Board is experienced in intellectual property, as pointed out by Mr. Cohen. The DNSO offers perhaps the only opportunity for us to promote the placement of a person on the ICANN Board who will be knowledgeable about the needs of the intellectual property community. However, given the makeup and the structure of the DNSO, we cannot be optimistic that the DNSO will select an intellectual property expert to be one of its three Board members, but we are working within the structure dictated to us.
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    Morever, notwithstanding the fact that the United States created the Internet, has the greatest investment in the infrastructure of and the commercial activity on the Internet, the largest number of Internet users, and is the world leader in creating content for the Internet, the bylaws of ICANN are such that even if a single person with an intellectual property background is selected for the board, that person may well not be from the United States and reflect U.S. interests. Nonetheless, failure of ICANN is not in the best interests of the long-term vitality and stability of the Internet. We disagree with the opposition of the Department of Commerce to the one dollar per year domain name registration fee. If the Department were concerned about cost, it would have looked at the $9 fee that NSI charges its competing registrars. As for charging a reasonable fee to finance ICANN, intellectual property owners have long been accustomed to user fees to underwrite the cost of administering the various intellectual property systems and we do not find the one dollar user fee objectionable. Rather, the more important issues are how ICANN sets that fee and what the control will be in years in the future.

    We agree with the others regarding the ''Whois'' database. We are very pleased therefore to see ICANN call for the contact information recommended by WIPO as well as for the public to have access by way of a ''Whois'' service to that information. AIPLA also believes that registrars should be required to adopt reasonable automated procedures to verify contact information. Cybersquatters and cyberpirates frequently provide fictitious contact information, making it just that much more difficult for a trademark or copyright owner to take action against them.

    We strongly agree with WIPO that a mandatory administrative dispute resolution procedure should be adopted for deliberate bad faith cases of abusive registrations. In order to prevent registrar shopping by cybersquatters, this procedure should be adopted by ICANN and imposed by ICANN on registrars for the resolution of all disputes on the open gTLDs. However, the adoption of a mandatory dispute resolution procedure by ICANN should not preclude parties to a dispute from filing a claim in the relevant national court.
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    AIPLA also believes that consideration should be given to amending the Lanham Act to provide for an in rem cause of action to strengthen the protection currently available against cybersquatters. A carefully crafted bill—targeting the registration of a domain name confusingly similar to a mark of another, by a person with no legitimate interest in that name, with the intent to benefit from the good will of the mark—would provide a desirable new remedy for trademark owners to protect their marks and prevent the perpetration of fraud on the consuming public.

    Finally, AIPLA regards the establishment of a mechanism for the exclusion across the open gTLDs of truly famous and well known marks as a sine quá non for the introduction of any new gTLDs. We would like to see ICANN assign the highest degree of urgency to the development and implementation of an exclusion mechanism for famous and well known marks.

    Again, Mr. Chairman, we commend you for holding this hearing and look forward to working with you in the future. Thank you.

    [The prepared statement of Mr. Kirk follows:]

PREPARED STATEMENT OF MIKE KIRK, EXECUTIVE DIRECTOR, AMERICAN INTELLECTUAL PROPERTY LAW ASSOCIATION (AIPLA)

SUMMARY

    The potential of the Internet for education, entertainment, commerce, and other fields is virtually limitless. But this promise will not be realized if consumers are uncertain whether the products advertised on the net are genuine or if producers of films and sound recordings cannot protect their investment.
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    The American Intellectual Property Law Association (AIPLA) endorsed the U.S. Government's initiative to call upon WIPO to develop recommendations for handling disputes, famous marks and the addition of new gTLDs for consideration by the new non-profit corporation, ICANN, and strongly supports the resulting report and its recommendations. We are concerned, however, that the Interim Board of ICANN lacks a member experienced in intellectual property. While the creation of the DNSO offers an opportunity to place such a person on the initial Board, we are not optimistic about the prospects for accomplishing this goal. The AIPLA disagrees with the opposition of the Department of Commerce to the $1 per-year, per domain registration user fee and regrets the decision of ICANN to eliminate this fee. Intellectual property owners have long been accustomed to paying user fees to underwrite the costs of administering the various intellectual property systems and we do not find the $1 user fee objectionable.

    The AIPLA was pleased to see that ICANN's March 4, 1999 Statement of Registrar Accreditation Policy called for the contact information recommended by WIPO and called for the public to have free, real time access to this information by way of a Whois service. We believe that registrars should be required to adopt reasonable automated procedures to verify contact information submitted by domain name applicants and that ICANN should establish a consolidated Whois database.

    The AIPLA strongly believes that a mandatory administrative dispute resolution procedure should be adopted by accredited registrars for deliberate, bad faith cases of abusive registrations or cybersquatting. In addition, ICANN, WIPO and other international bodies should press for the adoption of such a procedure by all country code top-level domain registrars to foreclose opportunities for cybersquatters to work their mischief in those domains. However, such mandatory dispute resolution should never preclude parties to a dispute from filing a claim in the relevant national court, even after the administrative procedure has been completed.
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    We believe that a carefully-crafted bill targeting the bad faith registration of a domain name with the intent to benefit from the goodwill of a trademark would provide a desirable new remedy for trademark owners to protect their marks and prevent the perpetration of fraud on the consuming public. Such legislation should include appropriate safeguards and serious consideration should be given to establishing an in rem cause of action against the domain name itself.

    Finally, the AIPLA regards the establishment of a mechanism for the exclusion across the existing generic Top Level Domains of truly famous and well-known marks as a sine qua non for the introduction of any new gTLDs.

STATEMENT

    Mr. Chairman:

    I appreciate the opportunity to appear before the Subcommittee today on behalf of the American Intellectual Property Law Association (AIPLA) to present the views of the Association at this Oversight Hearing on Internet Domain Names and Intellectual Property Rights.

    The American Intellectual Property Law Association is a 10,000 member, national bar association constituted primarily of lawyers in private and corporate practice, in government service, and in the academic community. The AIPLA represents a wide and diverse spectrum of individuals, companies and institutions involved directly or indirectly in the practice of patent, trademark, copyright and unfair competition law, as well as other fields of law affecting intellectual property. Our members represent both owners and users of intellectual property.
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Introduction

    The impact which the Internet has made on society is already enormous and yet it is still in its infancy. The potential of the Internet for education, entertainment, commerce, and other fields is virtually limitless. The creation of wealth and jobs in the United States has been staggering and yet it will increase many-fold in the next decade. For developing nations, the Internet offers access to worldwide markets without the investments required until very recently to build a worldwide marketing and sales infrastructure. But this promise will not be realized if we are not able to corral the wild-west, get-rich-quick activity of those who confuse and defraud consumers through their reckless behavior regarding the Internet. If consumers are uncertain whether the products advertised on the net are genuine or whether their credit card information will be abused, or if authors cannot protect their works or if producers of films and sound recordings cannot protect their investment, the potential of the Internet will not be realized.

    The AIPLA has been vitally concerned about the impact which cybersquatting and cyberpiracy have on the protection of intellectual property. For this reason, we have actively followed and commented on the Administration's Green Paper (A Proposal to Improve Technical Management of Internet Names and Addresses, February 20, 1998 (63 Fed. Reg. 8825)) which resulted in the Administration's White Paper (Policy Statement on the Management of Internet Names and Addresses, June 5, 1998 (63 Fed. Reg. 31741)). We complimented the Administration for undertaking the development of a policy to improve the administration of the domain name system and to establish effective procedures for registering domain names and addressing domain name disputes involving intellectual property rights.
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    The AIPLA has also presented testimony to this Subcommittee on issues surrounding intellectual property and domain name disputes and has participated in meetings on domain names convened by the World Intellectual Property Organization (WIPO) in Geneva, Switzerland.

    The AIPLA particularly appreciated the commitment of the U.S. Government in the White Paper to seek international support to call upon WIPO to develop recommendations for a uniform approach to resolving trademark/domain name disputes, recommend a process for protecting famous trademarks, and evaluate the effects on intellectual property owners of adding new gTLDs. We particularly commend the resulting report (The Management of Internet Names and Addresses: Intellectual Property Issues) and strongly endorse its recommendations. The extent of the efforts by WIPO to include all interested parties through the publication of requests for comments on the Internet and the convening of seventeen regional consultations literally around the world is unprecedented. The AIPLA actively participated in the WIPO Domain Name Process through presentations and submissions at the WIPO regional consultations in the United States and through representation on the WIPO Panel of Experts. Though some may differ with respect to the specific details and recommendations, the AIPLA believes that WIPO has synthesized the major viewpoints. We recognize the importance of balancing the interests of individuals and free speech against the need to provide a stable commercial medium that protects the interests of consumers and intellectual property owners, but we believe that the time for debate has passed and that the time for action is now at hand.

    The AIPLA also endorses the U.S. Government's decision to transition the governance of the Domain Name System to a non-profit corporation in a manner that will ensure the stability of the Internet and create competition in its administration. Though we continue to be nervous about the transition process from the U.S. Government to the Internet Corporation for Assigned Names and Numbers (ICANN), we have been working diligently within the guidelines established by ICANN to help it come into existence while at the same time seeking to protect the interests of intellectual property owners.
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Protection of Intellectual Property Rights by ICANN

    According to the ICANN Bylaws, by September 30, 2000, there will be nineteen elected members of the Board of Directors consisting of nine At Large Members, the President, and three Directors from each of the three Supporting Organizations. Presently, there is an Interim Board with ten members, and they have indicated that they expect the Supporting Organizations to elect their Board Members in time for them to be seated at ICANN's Annual meeting in Los Angeles in November of this year.

    The AIPLA joined with domestic and foreign intellectual property and trade associations last year in an effort to establish the Domain Name Supporting Organization (DNSO) (the other two Supporting Organizations are the Address Supporting Organization and the Protocol Supporting Organization). Following a false start culminating in the Board of Directors adopting some revised Bylaws for the DNSO following a meeting of the Board in Singapore in March of this year, we have worked diligently to create an Intellectual Property Constituency (IPC), one of seven initial Constituencies identified in Article VI–B of the revised Bylaws which sets forth the structure of the DNSO. The member organizations of the IPC are annexed to the statement of the IPC President, Jonathan Cohen, another witness at this hearing.

    The DNSO consists of a Names Council, which in turn consists of three elected representatives from each of the constituencies (currently seven, although one has not yet been recognized by the Board), and a General Assembly, which consists of all interested individuals and entities. The General Assembly will nominate persons from whom the Names Council will select the DNSO's three Directors.
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    The AIPLA has been participating in the creation of the DNSO because we believe that the adequate protection of intellectual property will be critical for the ultimate success of ICANN and for the Internet to continue its remarkable growth and realize its full commercial potential. The DNSO offers perhaps the only opportunity for us to promote the placement of a person on the Board who will be knowledgeable about the needs of the intellectual property community as regards the Internet. However, we are very concerned about our ability to accomplish this goal. At the risk of being too candid and frank, no one on the Interim Board is experienced in intellectual property. Moreover, given the make-up and structure of the DNSO, we are certainly not optimistic that the DNSO will select an intellectual property expert to be one of its three Board members, but we are working within the structure dictated to us. Apart from the Commercial and Business Entities Constituency, the remaining five Constituencies are not likely to have protection of intellectual property high on their list of priorities.

    In addition, the Bylaws provide that no two members from any one Constituency selected for the DNSO's Names Council may be citizens of countries in the same geographic region, except with the consent of the Board. Thus, notwithstanding the fact that the United States created the Internet, has the greatest investment in the infrastructure of and commercial activity on the Internet, the largest number of Internet users and domain name holders, and is the world leader in creating content for the Internet, the Bylaws of ICANN would appear to countenance the possibility that even if only one person with an intellectual property background from the DNSO's Names Council is selected for the board, that person may well not be from the United States. Even ignoring nationality, it is certain that of the current 18 (possibly 21) members of the Names Council, only three are certain to have intellectual property backgrounds. Such structural bias does not bode well either for sound intellectual property policies being forwarded to the Board or for the Board to have a member with an intellectual property background.
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    Nonetheless, failure of ICANN is clearly not in the best interests of the long term vitality and stability of the Internet. In this regard, we disagree with the opposition of the Department of Commerce to the $1 per-year, per domain registration user fee and regret the decision of ICANN to eliminate this fee. Even though Network Solutions, Inc. (NSI) is slowly relinquishing its monopoly for the registration of the .com, .org, and .net TLDs, it is charging the new registrars $9 per year for each second level domain name registered. While there should be adequate checks and balances in place to ensure that ICANN's budget is not excessive, we can only wonder why the Department of Commerce is silent on the $9 fee—dare we say tax—it allows NSI to impose on its competition. Intellectual property owners have long been accustomed to user fees to underwrite the costs of administering the various intellectual property systems and we do not find the $1 user fee objectionable.

Searchable Databases of Information on Domain Name Registrants

    As stated in the White Paper, intellectual property owners must have access to searchable databases of registered domain names that provide the information necessary to contact a domain name registrant when a conflict arises. In this regard, the AIPLA strongly supported the recommendation contained in the WIPO Interim Report that domain name registration agreements should call for accurate and reliable contact details consisting of (1) the full name of the applicant, (2) the applicant's postal address, (3) the applicant's e-mail address, (4) the applicant's voice telephone number, (5) the applicant's facsimile number, if available, and (6) where the applicant is an organization, the name of an authorized person for contact purposes. The AIPLA was therefore pleased to see that ICANN's March 4, 1999 Statement of Registrar Accreditation Policy called for this information as well as the expiration date of the domain name registration. In this regard, we would also like to have added to this list the date on which the domain name was first registered. We also supported the Interim Report's recommendation that this contact information be made publicly available and we were similarly pleased that ICANN's Policy calls for the public to have free, real time access to such contact information by way of a Whois service.
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    The AIPLA also believes that registrars should be required to adopt reasonable automated procedures to verify contact information submitted by new domain name applicants and by registrants renewing their registrations. Some of the most blatant cybersquatters provide fictitious addresses and other contact information, making it just that much more difficult for a trademark or copyright owner to take action against the perpetrator. While we do not suggest that registrars should be burdened with searching trademark databases to ensure that requested domain names do not conflict with registered trademarks of others, the use of on-line validation mechanisms to ensure the accuracy of contact information should be mandated.

    In order to facilitate the public's access to the contact information that each registrar accredited by ICANN must make available, the AIPLA believes that ICANN should establish a consolidated Whois database. ICANN has already announced fifty-two new post-testbed registrars (in addition to NSI and the five testbed registrars) and others are likely. It will become increasingly difficult for intellectual property owners to protect their interests if they must contact a growing number of registrars with differing systems to obtain contact information regarding domain name registrations. A consolidated Whois database would eliminate this potential problem.

Uniform Dispute Resolution Policies

    The problems created by disputes over domain name registrations and intellectual property rights are outlined in the WIPO Report: 1) the global nature of the Internet raises the potential for infringement of IP rights in several jurisdictions; 2) because there are more than 200 TLDs, the same dispute can arise in several TLDs; 3) in view of the speed of communication on, and global access to, the Internet, the need to quickly resolve disputes can be critical; and, 4) the economic value of the damage which can flow from an abusive domain name registration and the cost to IP rights holders and consumers can be enormous.
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    In light of these considerations, the AIPLA strongly believes that a mandatory administrative dispute resolution procedure should be adopted for deliberate, bad faith cases of abusive registrations or cybersquatting. With regard to the definition of what constitutes an abusive registration of a domain name, we would agree with the definition set forth in paragraph 171 of the WIPO Report. In order to prevent ''registrar-shopping'' by cybersquatters, this procedure should be adopted by ICANN and imposed on registrars for the resolution of all disputes in the .com, .org, and .net TLDs. In this regard, at its meeting in Berlin in May of this year, the ICANN Board referred WIPO's recommendations on dispute settlement to the DNSO for its consideration and requested that the DNSO submit its recommendations back to the Board by July 31. We know that the IPC input to the DNSO decision-making process will be very supportive of the WIPO recommendations and we can only hope that the other Names Council members will agree.

    In addition, ICANN, WIPO and other international bodies should press for the adoption of such a procedure by all country code top-level domain (ccTLDs) registrars to foreclose opportunities for cybersquatters to work their mischief in the 200-plus ccTLDs. Finally, the uniform dispute resolution procedures initially adopted by ICANN should be periodically reviewed with a view toward their improvement based on experience and as technology, circumstances and law require.

    While agreeing with WIPO that mandatory dispute resolution should be limited to deliberate, bad faith abusive registrations, the AIPLA would not wish parties to a dispute to be precluded from voluntarily submitting domain name disputes between parties with competing legitimate rights to such dispute resolution. At the same time, however, the adoption of a mandatory dispute resolution policy by ICANN should never preclude parties to a dispute from filing a claim in the relevant national court, even after the administrative procedure has been completed.
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Anti-Cybersquatting Legislation

    Before leaving the subject of dispute resolution involving the abusive registration of domain names, I would like to mention AIPLA's support for the concept of amending the Lanham Act to strengthen the protection currently available against the bad-faith registration of domain names confusingly similar to, or which would dilute, the trademark or service mark of another. We believe that a carefully-crafted bill targeting the registration of a domain name identical or confusingly similar to the mark of another, by a person with no legitimate interest in that name, with the intent to benefit from the goodwill of that mark as evidenced by objective criteria—with appropriate safeguards such as exemptions for the innocent registration of a person's name and freedom of expression to protect legitimate parody—would provide an additional and desirable new remedy for trademark owners to protect their marks and prevent the perpetration of a fraud on the consuming public. The AIPLA also believes that consideration should be given to creating an in rem cause of action against the domain name itself in which a court could order an appropriate remedy such as cancellation or transfer of the domain name.

    The AIPLA does not believe that it would be appropriate at this time to provide for criminal sanctions such as those contained in S. 1255 which was the subject of a hearing in the Senate last week. We do believe, however, that the provision of statutory damages, in addition to the existing Lanham Act remedies, would be desirable.

Famous and Well-Known Marks

    Famous and well-known marks have, for obvious reasons, been subjected to special attention by cybersquatters, requiring the owners of such marks to invest huge sums to protect them. The bright light of fame attracts cybersquatters much as a bright light in the night time attracts insects. It presents a serious problem for which the protection recommended by WIPO strikes us as an appropriate response.
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    The AIPLA regards the establishment of a mechanism for the exclusion in open gTLDs for truly famous and well-known marks as a sine qua non for the introduction of any new gTLDs. We are mindful of the concerns which have been expressed regarding the lowering of standards over time as to what qualifies as a famous mark. We believe, however, that the list of non-exhaustive factors recently adopted by WIPO's Standing Committee on the Law of Trademarks, Industrial Designs and Geographical indications, applied in a centralized administration by WIPO or other appropriate body, fully responds to these concerns. Indeed, contrary to those who oppose providing such protection for famous marks, we believe that the number of marks found to qualify for exclusionary status will be considerably smaller than even many trademark owners might expect. Accordingly, the AIPLA would like to see ICANN assign a high degree of urgency to the development and implementation of an exclusion mechanism for famous and well-known marks.

Conclusion

    We again commend you, Mr. Chairman, for holding this hearing on the promise and problems of the Internet as it affects intellectual property. As you will undoubtedly hear from all of the witnesses, the Internet raises a host of important issues which impact the creators and users of intellectual property. We look forward to working with you and the other Members of the Subcommittee as we travel with this exciting new medium into the new millennium.

    Mr. COBLE. Thank you, Mr. Kirk.

    Ms. Chasser.

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STATEMENT OF ANNE CHASSER, PRESIDENT, INTERNATIONAL TRADEMARK ASSOCIATION (INTA)

    Ms. CHASSER. Good morning, Mr. Chairman. On behalf of the 3600 members of the International Trademark Association, I want to thank you for the opportunity to provide a perspective from trademark owners on Internet domain names and intellectual property rights. Trademarks have been a critical part of the emergence of e-commerce. With the World Wide Web expanding every day, consumers, researchers, and typical net surfers need the assurance that they have reached their intended destination in cyberspace. That assurance, that sign is a trademark.

    You see, Mr. Chairman, from a purely technical perspective, it may be the root servers and the protocols that make the Internet work, but it is the brand awareness, the familiarity of a name by the average net citizen that has made the Internet a part of so many lives and the indispensable tool that it is today. It appears to us, Mr. Chairman, that in the debate over the future of the domain system, trademark protection in cyberspace has somehow been relegated to the back burner. In the last 5 years, INTA has worked to reverse this trend. We have tried to demonstrate that domain names can and often do function as trademarks and therefore must be protected on the Internet as they are in more traditional settings.

    To accomplish this protection, INTA has consistently worked toward the following six objectives: First, minimum standards for domain name registration; second, a publicly accessible domain name database; third, a uniform and easy-to-use dispute resolution policy; fourth, a reasonable method for obtaining exclusions for famous names; fifth, a go-slow approach to the addition of new generic top level domains; and finally, a voice for trademark owners in formulating domain name policy. We have made headway in some of these objectives, but in other areas there are some concerns.
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    First, we now have new registrars coming online, but no confirmed, centralized public database for monitoring potential domain name piracy. Second, at present there is no member of the interim ICANN board with expertise in trademark issues. Finally and perhaps most importantly, there is currently no uniform dispute resolution system. We need a uniform, easy to use dispute resolution system in place as soon as possible.

    One of the most pressing reasons is ''cybersquatting'' which is the bad faith registration and trafficking in domain names. Cybersquatters seek to capitalize on the value of trademarks. They do this with little or no investment of their own and with sometimes significantly less than good intentions. Some cybersquatters, Mr. Chairman, try to extract payment from the rightful owner of the mark, essentially holding the mark for ransom. For example, Warner Brothers reports that cybersquatters offered to sell them five domain names containing the Warner Brothers trademark for $350,000. In another case, they were offered 15 domain names, including bugsbunny.net. Others offer domain names for sale publicly to third parties. The University of California at Los Angeles, UCLA, was surprised at one point to learn that UCLA.com was on the auction block.

    Finally, there are those cybersquatters who use marks as addresses for pornographic sites or conduct consumer fraud. All of these examples highlight the fact that cybersquatting is not just about trademark infringement but equally important, it is about protecting consumers.

    INTA believes that the recommendations put forth by WIPO in its report will help stem the tide of cybersquatting. However, it is uncertain as to when or if many of the WIPO recommendations will be put in place. Therefore, some have suggested the creation of anti-cybersquatting legislation here in the United States. If some form of legislation is adopted, we believe that it must be effective against cybersquatters, but evenhanded as not to infringe upon fair use and rights of free speech.
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    In conclusion, Mr. Chairman, trademarks in the form of domain names are the street signs on the information superhighway and the awnings of cybershops. For the Internet to reach its full potential, consumers must trust the integrity of cyberspace as the new medium of commerce in the 21st century.

    Thank you again for this opportunity, and we welcome your continued oversight and active participation in this issue.

    [The prepared statement of Ms. Chasser follows:]

PREPARED STATEMENT OF ANNE CHASSER, PRESIDENT, INTERNATIONAL TRADEMARK ASSOCIATION (INTA)

SUMMARY

    INTA's objectives in the debate over the future of the domain name system (''DNS'') are quite simple. First, we have sought to demonstrate that domain names can and often do function as trademarks, and that trademarks must be afforded the same protection in cyberspace as they have in all other media. Second, to accomplish this protection, INTA has consistently sought the following:

(1) establishment of specific minimum standards for domain name registration;

(2) a publicly accessible domain name database, which contains up-to-date and accurate contact information;
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(3) a uniform and easy-to-use dispute resolution policy which renders administrative—not legal—decisions;

(4) a reasonable mechanism whereby exclusions can be obtained and enforced for famous marks;

(5) a ''go-slow'' approach on the addition of new generic top-level domains (''gTLDs''); and

(6) a voice for trademark owners in the formulation of domain name policy.

    In all the debate, the alphabet soup of acronyms, and the politics concerning who controls the Internet, trademark protection in cyberspace has somehow been relegated to the ''backburner''. This will have serious consequences for e-commerce if it is not rectified in the immediate future.

    Trademarks have been an integral part of the growth of e-commerce. With the ''World Wide Web'' becoming ever so tangled, consumers, researchers, and typical ''Net surfers,'' need some type of assurance that they have reached their intended destination in cyberspace. That assurance, that sign, is a trademark. Trademarks, in the form of domain names (i.e. www.oreo.com) are the street and house signs on the ''information superhighway'' and the awning of the ''cyber-shop'' as well. From a purely technical perspective it may be the rootservers and protocols that make the Internet work, but it is brand awareness—the familiarity of a ''name'' by the average ''Netcitizen''—that has made the Internet a part of so many lives and the indispensable tool that it is today.

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    Actually, we are already witnessing a glimpse of what may come if action is not taken to protect trademarks in cyberspace. The threat is ''cybersquatting.''

    Cybersquatting can be referred to generally as the registration and trafficking in Internet domain names with the bad-faith intent to benefit from another's trademark. Cybersquatters seek to capitalize on the investment made by trademark owners and the goodwill associated with the trademark. INTA supports effective, yet even-handed anti-cybersquatting legislation.

    INTA has committed itself to the privatization of the DNS and supports efforts to create a stable, representative organization which can meet the needs of e-commerce in the 21st Century. There are, however, hurdles which we must overcome before we reach this goal. In particular, the establishment of a centralized, publicly accessible database, the creation of a uniform dispute resolution system, and the presence of cybersquatters.

STATEMENT

Introduction

    Thank you, Mr. Chairman and Members of the Subcommittee, for this opportunity to offer the perspective of trademark owners on Internet domain names and intellectual property rights. The International Trademark Association (''INTA'') welcomes the Subcommittee's oversight in this area and looks forward to a productive and enlightening discussion here today.

    INTA's objectives in the debate over the future of the domain name system (''DNS'') are quite simple. First, we have sought to demonstrate that domain names can and often do function as trademarks and that trademarks must be afforded the same protection in cyberspace as they have in all other media. Second, to accomplish this protection, INTA has consistently sought the following:
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(1) establishment of specific minimum standards for domain name registration;

(2) a publicly accessible domain name database, which contains up-to-date and accurate contact information;

(3) a uniform and easy-to-use dispute resolution policy which renders administrative—not legal—decisions;

(4) a reasonable mechanism whereby exclusions can be obtained and enforced for famous marks;

(5) a ''go-slow'' approach on the addition of new generic top-level domains (''gTLDs''); and

(6) a voice for trademark owners in the formulation of domain name policy.

    These goals have remained relatively unchanged since we became involved in the issue almost five years ago. Of course, a great deal has happened with regard to the DNS in that time. First, there was only Network Solutions, Inc. (''NSI''), acting as the registry and sole registrar for the popular gTLDs .com, .net, and .org. Next came the proposed plan by the International Ad Hoc Committee. (''IAHC''). After IAHC came the U.S. Government's ''White Paper'' process. Now, today, we are working with the Internet Corporation for Assigned Names and Numbers (''ICANN'') and the multiple registrars that have arisen.

    It appears to us, Mr. Chairman, that in all the debate, the alphabet soup of acronyms, and the politics concerning who controls the Internet, trademark protection in cyberspace has somehow been relegated to the ''backburner''. This will have serious consequences for electronic commerce (hereinafter referred to as ''e-commerce'') if it is not rectified in the immediate future.
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E-Commerce: Why Trademarks Should Be Protected in Cyberspace

    E-Commerce figures are steadily moving up and off the charts. A study by the University of Texas' Center for Research in Electronic Commerce, which was sponsored by Cisco Systems and cited by the Department of Commerce in its report entitled The Emerging Digital Economy II, indicates that 1998 total e-commerce (business-to-business plus business-to-consumer) was $102 billion.(see footnote 20) The Department of Commerce itself, has stated:

  The Internet plays an important role in a much larger number of transactions than those completed online. In addition to the shoppers who choose items online, but pay for them off-line, the Internet is an important source of research that influences off-line ordering and purchasing, particularly for big ticket items such as autos.(see footnote 21)

    Trademarks have been an integral part of this growth. With the ''World Wide Web'' becoming ever so tangled, consumers, researchers, and typical ''Net surfers'' need some type of assurance that they have reached their intended destination in cyberspace. That assurance, that sign, Mr. Chairman, is a trademark. Trademarks, in the form of domain names (i.e. www.oreo.com) are the street and house signs on the ''information superhighway'' and the awning of the ''cyber-shop'' as well.

    Imagine, if you can, an Internet without protection for trademark interests. The results would be disastrous. Consumer confidence in the Internet would fade, while companies that own trademarks, faced with increased infringement and dilution, would be reluctant to advertise their goods and services on a medium where their investment in intellectual property is unprotected. I think we can all agree that nobody wants that to happen, not with millions of jobs and billions of dollars at stake. You see, Mr. Chairman, from a purely technical perspective it may be the rootservers and protocols that make the Internet work, but it is brand awareness—the familiarity of a ''name'' by the average ''Netcitizen''—that has made the Internet a part of so many lives and the indispensable tool that it is today.
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    With so much at stake, we must place the necessary emphasis on trademark protection in cyberspace. This is not a matter of ''big corporations and trademark holders'' vs. the individual domain name holder, as some have characterized it.(see footnote 22) Rather, it is a matter of ensuring that the consumer knows that the goods and services he is viewing on the Internet are genuine, safe, and reliable and protecting the investment of a trademark owner in the same way it is protected in other forms of media, such as print, radio, and television.

Ensuring Trademark Protection in Cyberspace

    So, how do we ensure trademark protection in cyberspace? This question is especially relevant in light of the formation of ICANN to administer the DNS and the release of a report by the World Intellectual Property Organization (''WIPO'') titled The Management of Internet Names and Addresses: Intellectual Property Issues.(see footnote 23) The report by WIPO came at the request of the U.S. Government, and was preceded by a 10 month study, 15 public meetings held around the globe, and submissions by over 1,300 participants.(see footnote 24)

    At the opening of my statement, I outlined six objectives that INTA believes, when attained, will safeguard trademark rights. I will now briefly discuss each objective and offer a perspective as to the manner in which they have been addressed by either the WIPO report, ICANN, or both.

(1) Standards for Domain Name Registration
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    As noted above, if consumers cannot trust the integrity of goods purchased over the Internet, e-commerce will suffer significantly. Accountability starts with identity. Under the current DNS, a domain name can be obtained and immediately utilized without verification of identifying information, which is unacceptable. We, therefore, advocate the establishment of specific minimum standards for domain name registration and renewal. Among these standards are:

 relevant, accurate, and up-to-date contact information, such as name, address, e-mail, phone, and fax numbers;

 dates for registration, renewal, and change of ownership;

 agreement to jurisdiction (at least in the jurisdiction of the registrar) in the event of litigation; and

 prepayment of the requisite application and renewal fees.

    Status: WIPO included minimum standards in its report and ICANN has subsequently incorporated a number of WIPO's recommendations as part of their ''Registrar Accreditation Agreement,'' noting that all new registrars should have the procedures in place when they come online.

(2) Publicly Accessible Database

    It is critical that there be a publicly accessible, centralized database established by each registry, and that accurate contact details be included in such a database. Access should be unrestricted and free of charge. Trademark and other intellectual property owners need complete and accessible information if they are to contact potential infringers at an early stage before consumer confusion occurs.
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    Status: In recent months, database accessibility has come into question. There is a debate over who precisely owns the data—NSI or the public. From our previous comments, it is clear that INTA views this information as a public resource and not privately owned intellectual property. There is also a question of the establishment of a centralized database now that five new test-bed registrars have come online. As far as we know, there is none. Moreover, we have had no indication as to when ICANN intends to set one up.

(3) Dispute Resolution

    INTA believes that a reasonable administrative dispute resolution policy is an essential element of any plan for the administration of domain names on the Internet. Discretion for domain name policy should neither reside with the domain name registrars, nor with the registries. Any dispute policy needs to be consistent across the gTLD space. A lack of uniformity and specificity will only lead to confusion on the part of trademark and domain name holders, fundamental unfairness in the unequal treatment of rights in domain names and therefore inconsistent policies and precedent, chaos in the Internet community, and in the end, increased, rather than decreased transaction costs. The burden of these costs will ultimately be paid by consumers. If the goal is to create a system which is fair and predictable, and a relief to the current confusion and uncertainty, there can only be a single uniform system. There is no division among trademark holders on this point. A global marketplace and community requires a single set of global rules.

    Accordingly, INTA believes that any dispute policy must be uniform across the open gTLD space and must avoid trying to resolve complex, fact-intensive trademark infringement disputes, which are more appropriately suited to judicial analysis and decision.
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    Therefore, any dispute resolution policy should be limited, at least during an appropriate interim period, to alleged instances of bad-faith activity by the domain name registrant.

    Such a procedure, however, should not preclude a party from utilizing the national court systems as appropriate.

    Status: WIPO agreed with INTA's recommendations for a uniform dispute resolution mechanism, which for an interim period, would be limited to alleged instances of bad-faith. ICANN subsequently accepted the call for uniformity, but questioned the recommendation that the dispute resolution procedures be limited to alleged bad-faith.

    As of today's hearing, ICANN has not yet established a uniform policy. Until this is done, new registrars that are accredited by ICANN are requested, but not required to adhere to a uniform policy which they have been asked to work out among themselves. Separate dispute resolution policies amongst registrars is a recipe for disaster, Mr. Chairman. In particular, the registrars with the weakest intellectual property provisions will become havens for bad-faith actors. This type of forum shopping will only engender confusion, and preventing it should be one of ICANN's top priorities.

    INTA supports the efforts of the registrars to develop a uniform policy, and we are currently working with them and WIPO on an initiative. However, we note that there is no real timetable in place for the establishment of any uniform policy, and no procedure is in place in the event that an agreement cannot be reached.
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(4) Exclusion Mechanism for Famous Marks

    INTA supports the proposal that some type of clearing mechanism be applied for marks which would be deemed ''famous'' or ''well-known''. This would be beneficial, since famous marks are especially inviting to domain name pirates.

    Status: The famous mark question was one which the U.S. Government specifically asked WIPO to address. In its report, WIPO did in fact recommend a clearance mechanism. However, it has met with criticism from those who believe that trademark owners do not have the right to reserve domain names and that the proposal places individuals who own domain names at a significant disadvantage. INTA believes that a solution can be found and intends to work with ICANN, WIPO, and others in the Internet community in developing a clearance mechanism.

(5) ''Go-Slow'' Approach on New gTLDs

    Should the Internet community, including trademark owners and technical personnel collectively, determine that the addition of new gTLDs is necessary, INTA strongly believes that any new gTLDs should only be added, if at all, one-at-a-time along with the appropriate safeguards in the form of i) improved domain name registration procedures; ii) implementation of speedy and effective dispute resolution procedures; and iii) adoption of a system for protecting famous trademarks across all gTLDs as well as suppressing the abusive registration of domain names in all gTLDs.

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    Status: WIPO indicated support for the ''go-slow'' approach. It appears that ICANN, at least for now, has no current plans to expand the number of gTLDs.

(6) Trademark Representation in Internet Governance

    The Internet is used by so many people, businesses, and organizations that it is difficult to categorize the various parties. Developing a membership structure for ICANN and ensuring that all of the interested groups are represented in a governance mechanism is an important task as we move to privatized management of the DNS.

    In developing a structure for tomorrow, we should not forget the past—in particular, the impact that trademarks have had in making the Internet a powerful commercial tool. If the Internet is to serve the needs of international commerce, such as maintaining brand equity, and consumers' interests in relying on such brand equity, the trademark community must have a significant voice in domain name policy. Otherwise, a governing body weighted heavily toward the Internet technical community or registries/registrars may not fully understand or appreciate the relevance of trademark concerns to business and consumers.

    Status: At present, there are no members of the ICANN Board with identified experience in trademark law. INTA is indeed hopeful that this oversight will be corrected either through the intellectual property community's participation in the Domain Name Supporting Organization (''DNSO''), an ICANN subsidiary, or perhaps through a realignment of the ICANN membership structure. Either way, for the reasons stated above, it is critical that there be trademark expertise on the ICANN Board.

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Cybersquatting: The Danger of Doing Nothing

    I have just described six measures for ensuring trademark protection in cyberspace, which will lead to continued growth in e-commerce. I also said that if we do not act, there may be serious consequences to online commercial activity. Actually, we are already witnessing a glimpse of what may come if action is not taken. The threat I speak of, Mr. Chairman, is ''cybersquatting.''

    Cybersquatting can be referred to generally as the registration and trafficking in Internet domain names with the bad-faith intent to benefit from another's trademark. Cybersquatters seek to capitalize on the investment made by trademark owners and the goodwill associated with the trademark. In the words of Francis Gurry, Assistant Director General for the World IntellectualProperty Organization (''WIPO''), cybersquatting is ''an abusive practice'' that undermines ''consumer confidence.''(see footnote 25)

    INTA has found that ''cybersquatting'' takes place for a number of reasons, including the following:

(1) To extract payment from the rightful owner of the mark. These are the most prevalent cases, since it takes only $70 to register a domain name with Network Solutions, Inc. (the registration authority for .com, .net, and .org), and the potential financial windfall (should a trademark owner opt to purchase the domain) is much greater.

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— Warner Bros. was offered warner-records.com; warner-bros-records.com; warner-pictures.com; warner-bros-pictures; and warnerpictures.com for the selling price of $350,000. Another cybersquatter offered to sell to Warner Bros. 15 domain names, including bugsbunny.net and daffyduck.net.

(2) To offer the domain name for sale publicly to third parties.

— The University of California at Los Angeles (commonly referred to as ''UCLA''), took action against a cybersquatter who registered www.ucla.com and then put up a ''for sale'' sign with a number to call. Shortly after counsel for UCLA sent a letter to the cybersquatter, it became a pornographic site. The party operating the pornographic site was found to have several addresses and phone numbers, none of which were legitimate.

(3) To use famous marks as domain names for pornographic sites or otherwise capitalizes on customer confusion.

— The Mobil Oil Corporation reports that its trademark, MOBIL 1, was used in a domain name to direct Web surfers to a pornographic site. The domain name was mobil1.com.

(4) To engage in consumer fraud, including counterfeiting activities.

— AT&T reports that a cybersquatter registered the domain names attphonecard.com and attcallingcard.com and established a Web site soliciting credit card information from consumers. AT&T was concerned because its brand name was being used to lure consumers to a Web site that might be used fraudulently to obtain financial information from unsuspecting consumers.
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    Some cybersquatters have taken the necessary precautions to insulate themselves from the ''use in commerce'' requirement under U.S. trademark law. Cybersquatters register famous trademarks in bulk, but in most cases, do not post an active Web site. This activity is traditionally referred to as ''warehousing.'' In addition, cybersquatters are now careful to no longer offer the domain name for sale in any manner that could result in liability under current case law.(see footnote 26)

    Finally, some cybersquatters provide false and misleading contact information, as a consequence, many courts have been unable to provide assistance to trademark owners.(see footnote 27)

    The recommendations put forth in the WIPO report will help to stem the tide of cybersquatting. However, as indicated above, it is unclear as to when or if the proposals by WIPO will be adopted. As a result, in recent weeks, there has been talk of national anti-cybersquatting legislation. The provisions of this legislation would compliment any administrative mechanisms that are eventually put in place.

    INTA supports effective, yet even-handed anti-cybersquatting legislation. We believe that such legislation, should, at a minimum, include the following:

(1) Provisions that explicitly prohibit cybersquatting, specifically, the registration and trafficking of an Internet domain name with the bad-faith intent to benefit from another's trademark.
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(2) Clear remedies for trademark holders, including the availability of injunctive relief and the ability to recover actual or statutory damages.

(3) Protection of the public interest, including allowing for legitimate uses of domain names that meet fair use/freedom of expression standards.

    We anticipate that the dialogue concerning anti-cybersquatting will be ongoing, and remain open to suggestions as to specific provisions for the legislation.

Conclusion

    Thank you again, Mr. Chairman, for this opportunity. For the last five years, INTA has served as the voice of trademark owners during the debate over the future of the Internet. Over that time, the Association has committed itself to the privatization of the DNS and supports efforts to create a stable, representative organization which can meet the needs of e-commerce in the 21st Century. There are, however, hurdles which we must overcome before we reach this goal; in particular, the establishment of a centralized, publicly accessible database, the creation of a uniform dispute resolution system, and the presence of cybersquatters.

    We welcome your continued oversight and active participation in this issue, Mr. Chairman, and look forward to working with you and others to establish sound mechanisms for trademark protection in cyberspace.

    Mr. COBLE. Thank you, Ms. Chasser. Now, with this arsenal of talent before us, I think that we are obliged to take a second round of questions, I am advised that Messrs. Cohen and Kirk are on a tight schedule. So why don't we members try to put questions to Mr. Cohen and Mr. Kirk on our first round and then you gentlemen will be able to depart and comply with your schedule. Folks, we appreciate very much you being here.
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    Mr. Gurry, let me start with you. In your dealings with ICANN, how responsive has the ICANN board been to intellectual property concerns?

    Mr. GURRY. Thank you, Mr. Chairman. Mr. Chairman, our dealings with the ICANN board have been rather formal in the sense that we submitted our report as mandated by the request from the United States Government to the ICANN board. We have naturally worked with the staff of ICANN on certain of the recommendations concerning registration practices in the drafting of ICANN's registrar accreditation policy. With the board itself, we have had the opportunity to present our report at its meeting in Berlin. We were not present during the deliberations of the board meeting, of course.

    Mr. COBLE. Mr. Cohen, in your written testimony you expressed concern about the lack of representation of intellectual property interests on the ICANN board. Overall in your opinion, what is the attitude of the ICANN board members to intellectual property concerns?

    Mr. COHEN. I don't know, Mr. Chairman, that I can speak for the overall feeling of the board, but certainly a number of members in the intellectual property community have had concern at various points during the process whether there was enough attention being paid to intellectual property interests. In particular members of other constituencies have at various times been doubtful about the value of the participation of intellectual property practitioners. However, I must say that in recent months I have felt personally, and I think that others have, that there has been a greater awareness and acceptance of intellectual property practitioners as a vital part of the process.
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    Mr. COBLE. Mr. Kirk, with the creation of ICANN as an international entity, are American intellectual property rights being adequately protected in the domain name system? Specifically has the ICANN structure given American intellectual property owners an appropriate voice in ICANN decision-making?

    Mr. KIRK. That is a little difficult to answer at this juncture because we haven't seen the final composition of the Board. But if you look at the bylaws that ICANN has adopted, with the emphasis on internationalizing the Board, there is too great an emphasis, I think, on drawing the members from around the world and not enough on representing the existing Internet community. For example, there is a policy that for Names Council members—of which the Intellectual Property Constituency has three, that no two of them can be from the same geographic region without the express consent of the board. We currently have two members on the Names Council from the IPC, but two of them are from North America. The question is whether this will be permitted to continue or not.

    I know that Mr. Cohen has tried very hard to encourage participation from other regions of the world and they simply aren't coming in to participate. The bottom line is this: there are currently 7 constituencies, 6 of which have been approved, which means that there will be between 18 and 21 Names Council members, only three of which are going to be IP names Council representatives. And having participated in the Berlin ICANN meeting and having seen what I would call less than a receptive attitude by the majority of the participants of that meeting toward concerns of intellectual property, however, I would certainly have concerns at this point, and I think that our Association does as well.

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    Mr. COBLE. Mr. Roberts, I recognize that ICANN may be between the rock and the hard place given the criticisms that you are receiving from some people that oppose your interim board making decisions whatsoever. On the other hand, there are many people, including some us on the subcommittee, who are concerned about ICANN's lack of action in adopting the WIPO recommendations on contact details and dispute resolution. What say ye to that, Mr. Roberts?

    Mr. ROBERTS. Mr. Chairman, as I think you and others have noted, we have a bit of a mine field here. I would note that we started back in January with the draft WIPO report and other materials in developing the accreditation guidelines that we were obliged to work on as part of our being named in the government's agreement with Network Solutions about opening competition. Much of that material, as Mr. Gurry has testified, was reflected in the accreditation guidelines that we adopted in our meeting in Singapore in March. We believe that we have taken a major step forward with regard to the abusive practices at the registration level in this matter, as I also testified.

    Now, in the other two major parts of the WIPO report having to do with the ADR, you have heard that that is very much in progress at the moment. It is calendared for our board meeting in 3 weeks. I have every expectation the names council will forward a recommendation to us. I would like to note for the committee with respect to fairness and evenhandedness and also attention to expertise that the bylaws require presumptive recognition of the authority of a support organization when it is making recommendations to us on its area of special competence, which are domain names, IP addresses, and protocols. So it is certainly the case that this will receive attention over and beyond an ordinary committee recommendation. With regard to the third parties you have heard, we asked for recommendations on that matter only 60 days from now which is a very short time for a very substantial amount of work from the domain names organization.
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    Mr. COBLE. Thank you, Mr. Roberts. Let the record show that I did put my question to you, Mr. Roberts, before the red light came on. I recognize the gentleman from California.

    Mr. BERMAN. It is a standard that I will try to adhere to. Thank you, Mr. Chairman.

    I would like to use at least this round to ask Mr. Daniels some questions. Hopefully not on this 5 minutes, but maybe on the second round, I think Mr. Daniels would have a chance to respond to Mr. Stubbs' sort of indictment. But here I am more curious about a couple of issues.

    You talk about—this notion of ownership comes up, do you own this. Apart from the legal merits of your argument, the thing that makes some of us nervous is that when—if you own it, you not only have the registration potential revenues coming in, but you will start thinking about how do I market the access to that database in a fashion that very understandably would further your—the economic benefits to the company. And so I guess what I would like to know, if you could respond to, is, first, in light of the Feist decision—we are spending a lot of time, as Mr. Delahunt referred to, trying to deal with how do we provide a protection for database collections. In view of the Feist decision, how do you really make this case for ownership? And then secondly, yes, you have written me and I think said to others that you are willing to share the database with intellectual property owners. But I guess on the question of trust, would you take this opportunity at this hearing now to commit that you will, regardless of the outcome of the dispute regarding your ownership of ''Whois,'' that you will maintain ''Whois'' as publicly available on a real time basis without any restrictions, first of all; secondly, that the registrants' information will be verified by Network Solutions as accurate; and three, that every registration search result will include all of the data elements required by the ICANN accreditation agreements? Would you be willing to make those representations and also your theory of ownership?
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    Mr. DANIELS. Sure. Thank you, Mr. Berman. I appreciate you asking those questions. If I could answer your question about ownership basis because that does go to one of the key questions. And then the other is access to this data. There is no question in our minds nor has there been since I acquired Network Solutions in March 1995, which was after the original award of competitive operative agreement to Network Solutions which they began in January 1, 1993, that all ownership rights to the data and everything surrounding that goes to the awardee. A cooperative agreement from the National Science Foundation is not a government contract. That is very clear.

    Mr. BERMAN. How do you deal with Feist and that——

    Mr. DANIELS. I am frankly not aware of all of the details of that.

    Mr. BERMAN. Sometimes perhaps just in writing——

    Mr. DANIELS. I would be glad to. I am just not specifically aware of all of the details of all of that. Secondly, please don't believe us on this. What I would tell you is this exact set of issues were asked of the National Science Foundation and the Acting Director, Mr. Joseph Bordogna, in hearings before the House Science Committee September 25 and 30th of 1997. And I will submit all of that, which is in your record, that Mr. Bardogna under this exact set of questions over a year ago said all of these rights and everything that has been developed go to Network Solutions. It is not even a question about the ownership in our mind.

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    [The information referred to follows:]


Network Solutions,
Herndon, VA, August 10, 1999.
Hon. HOWARD COBLE, Chairman,
Subcommittee on Courts and Intellectual Property,
Committee on the Judiciary,
House of Representatives, Washington, DC.

Re: Network Solutions, Inc.'s Obscene Domain Names Policy and Internet Root Zone Server Y2K Readiness Assessment

    DEAR CHAIRMAN COBLE: I am writing to provide additional information and to supplement the record, as requested by Congressman Cannon, with respect to two issues that arose during the July 28, 1999 hearing before the Subcommittee on Courts and Intellectual Property.

    The first issue concerns the ability of Network Solutions, Inc. (''NSI'') to maintain its policy of prohibiting the registration of domain names which contain particular obscene words. We must respectfully disagree with the position of the Department of Commerce, as stated in its July 28, 1999 letter to you and a July 29, 1999 letter addressed to me. (Copies of both letters are attached as Exhibits A and B.) NSI's position is set forth below.

    When NSI was a unified registry-registrar, its obscene names policy applied at both levels. As is clear from the documents which we have enclosed for the Subcommittee, as requested by Congressman Cannon, that policy was eliminated at the NSI-Registry level.
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    Enclosed is a copy of the draft Registrar License And Agreement, dated February 23, 1999 (Exhibit C). We refer your attention to subsection (p) of Section 1. During this time, it was NSI's position, as a registry, that NSI's obscene names policy would apply to all registrars, including the NSI registrar. Thus, the language reads:

(p) Registrar agrees to comply with NSI policies, that are applicable to all registrars, which prohibit the registration of certain domain names in the .com, .org and .net TLDs.

This language was meant to cover the obscene names and any character strings for which, on advice of our counsel, NSI might incur civil or criminal liability under federal statute.

    On April 13, 1999, a meeting was held at the General Counsel's Office of the Department of Commerce, at 15th and Pennsylvania Avenue. At that meeting, both of our outside counsel, recall this provision being discussed and eliminated at the NSI-Registry level. Indeed, our outside counsel argued with both Ms. Burr and Mark Bohannon that NSI had maintained this policy since mid-1996 and at both substantial cost of administration and litigation and at considerable loss of potential registration income. Our counsel, however, argued that the price was worth it because the Board of Directors wanted to maintain the policy. Both outside counsel recall that the Department, as verbalized by Ms. Burr and Mr. Bohannon, firmly believed that this gave too much discretion and power to NSI. The subsection, as written, was conceded at the insistence of the Department. In effect, NSI was asked to give up its First Amendment rights on this issue, as a registry, and capitulated to the Department. Both outside counsel, from two separate law firms, recall, however, a less than amicable debate occurring wherein Mr. Sbarbaro declined Mr. Bohannon's insistence to eliminate the concept of statutory liability. Mr. Sbarbaro distinctly recalls arguing that ''you must give this company the right to protect itself from criminal liability under federal statute.'' Mr. Bohannon then agreed, as did Ms. Burr.
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    Thus, by April 15, 1999, when the next version was prepared and disseminated, the provision, now enumerated as Section 2, subsection (n), limited the NSI-registry power to ''certain domain names in the .com, .org, and .net TLDs which are not allowed to be registered by statute or regulation'' (emphasis added) (Exhibit D):

(n) Registrar agrees to comply with the policies of NSI as Registry that will be applicable to all registrars and that will prohibit the registration of certain domain names in the .com, .org and .net TLDs which are not allowed to be registered by statute or regulation.

    Two weeks later, when this matter was brought to the attention of Mr. Daniels, the Chairman of the Board of Directors, he immediately placed a telephone call to Ms. Burr. A number of persons were in the room and the call took place on speakerphone. As you will see from the confirming letter, drafted and delivered via facsimile on April 30, 1999, the discussion focused specifically on the obscene names policy and the section of the Registrar License And Agreement which contained its elimination, now Section 2.14. (As finally renumbered, as Section 2.22, the subsection continues the limitation of NSI's discretion, as a registry, to ''statute or regulation.'') Mr. Daniels' short confirming note to Ms. Burr following the telephone conference is enclosed as Exhibit E.

    It has been nearly two months since the first new registrars came on line. Everyone has had knowledge and notice of this situation. We believe that some registrars have variations of NSI's obscene names policy and some do not. Pursuant to the spirit and letter of our negotiations and the resultant terms of the Registrar License And Agreement, it would be inappropriate for us, as the NSI-registry, to monitor the situation. As the NSI-registrar, however, we have maintained our right not to register these names and continue to forego the associated income. We regret what has happened but, as you can see, this matter has been taken from our discretion. The July 29, 1999 letter from the Department of Commerce attempts to clear up the situation. However, that letter does not state how obscene names using combinations of the previously prohibited seven words, which have been newly registered by competing registrars, such as CORE, might be cancelled retroactively, Moreover, given the fact of actual operations of the multiple registrar system and the contractual terms between the NSI-registry and existing registrars, it is not feasible for NSI to reintroduce its obscene names policy across the .com, .org and .net top level domains. The authority would seem to now rest with ICANN, which through a consensus-based process, could consider this issue in the future.
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    I regret this result from our negotiations with the Department of Commerce. I regret how it reflects on .com, .org, and .net as top-level domains, and I regret how it may be perceived by the American Internet community and viewed by our children. The Department and we must work together more closely so that the Department better understands the ramifications of the decisions it makes.

    The second issue concerns the question regarding Y2K readiness of the Root Server System. As you may know, the Root Server System sits at the top of the Internet's hierarchy of computers, and contains the ''root zone file.'' The file contains a list of the approximately 250 top level domains (''TLDs'') (.us, .com, .mil, etc.) and the number (known as an Internet Protocol (''IP'') number) for each machine at the next level down, which serves to house all of the second-level domain names in each particular TLD.

    The Root Server System, however, is not a ''system'' in the way you might believe. It is composed of thirteen ''redundant,'' separate machines, located, because of historical accident, at sites which do not necessarily provide the best geographic dispersion. Eight of the thirteen machines are directly or ''indirectly'' controlled by the United States Government:

2—  owned by NSI

2—  owned by the University of So. California

1—  owned by the University of Maryland
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1—  located at the NASA Ames Research Center

1—  located at the DOD Network Information Center

1—  located at the U.S. Army Research Laboratory - Aberdeen

The other five machines are owned and operated by private entities and are located in New York, California (2), Sweden, and Japan, respectively.

    No contracts, however, exist between or among the thirteen Root Zone Server operators. Although NSI, pursuant to its Cooperative Agreement with the U.S. Government, acts as the ''primary'' Root Zone Server, NSI has no contract with the other Root Zone Server operators. Each evening, NSI ''updates'' the root zone file, making any modification, as authorized and directed by the U.S. Government. As you might assume, however, very few changes are made. No new TLDs have been added and machine locations seldom change. The other Root Zone Server operators, however, are not contractually obligated, and as a matter of normal course, do not necessarily pull the root zone file from NSI on a daily basis. Thus, the ''system'' is voluntary, unregulated and unprotected.

    As for Y2K readiness, NSI, by the end of 1998, had completed a test of the two root zone servers that we own to ensure their proper operation into and through the year 2000. The test environment reproduced the existing production environment, and included source code scanning and clock rollbacks. The test methodology looked at the most critical Year 2000-related date transitions (there is more than one critical date), simulated normal Root Server functions before, during, and after the critical date transitions and validated the proper responses from our root servers. Additionally, we followed industry best practices in receiving certification from vendors as to Y2K certifiability for hardware, software, communications and environmental systems.
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    In the spirit of cooperation, NSI then summarized its test methodology and shared that summary with other Root Server operators in order to facilitate their own assessments. Whether those assessments have been conducted is unknown.

    Our understanding is that ICANN has certified the root operators on the results of a voluntary survey form executed and returned by each of the Root Server operators. We believe that a third party audit or independent verification might also be in order.

    Additionally, there is some question as to the Y2K readiness of the non-root server components of the DNS system. The fundamental resolution software that is used worldwide for the Domain Name System is called BIND and it is maintained and distributed by a group called the Internet Software Consortium. The newest version of BIND (version 8.1) has been certified by DOD and others as being Y2K compliant. However, a large part of the major network installations on the Internet are probably running older versions of BIND which have not been so certified. Although unlikely, the result could be an excessive number of queries against an already overloaded Root and TLD server system which could result in denial of DNS service to millions of Internet users.

    NSI's Chief Technology Officer, David Holtzman, recently participated in the government's Internet Y2K Roundtable at the President's Council on Year 2000 Conversion, on July 30, 1999, where several of these issues were brought up and discussed by participants from industry and government. We, of course, would be pleased to make Mr. Holtzman available to respond to any further questions you might have on the technological vulnerabilities of the system and ways, from our perspective, to minimize or to eliminate them.
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Best Regards,

Michael A. Daniels, Chairman of the Board,
Network Solutions, Inc.

cc. Congressman Chris Cannon

     


Network Solutions,
Herndon, VA, April 30, 1999.
J. BECKWITH BURR, Esq.,
Acting Associate Administrator for International Affairs,
National Telecommunications and Information Administration,
U.S. Department of Commerce, Washington, DC.

RE: Seven Words, LLC, v. NSI and ICANN, Case #99 02816SVW (U.S.D.C. C.D. CA)

    DEAR MS. BURR: At the hearing on Monday, May 3, 1999, District Court Judge Wilson may require NSI, as a registrar, to begin registering the Carlin (Six) Dirty Words and all their variations. This is contrary to NSI's corporate philosophy and practice for the last three years.

    As we discussed on Friday, you will recall that, under §2.14 of the Registrar License And Agreement, the Department of Commerce determined that NSI, as registry, should not have the discretion to restrict registrations on the basis of obscenity. However, NSI, as a registrar, does have the discretion to restrict these words, just like any other competing registrar. As you said, ''It's up to the individual registrars to decide''. Thank you for confirming these issues.
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Sincerely,

Michael A. Daniels, Acting CEO,
Chairman of the Board.

cc:

J. Emery, Esq.
P. Sbarbaro, Esq.
D. Graves
D. Holtzman

    Mr. BERMAN. I understand your position. I was curious about the Feist case. But let's just in the meantime, go on to the questions of willingness to make—are you willing to maintain ''Whois'' as a publicly available system on a real time basis without any restrictions?

    Mr. DANIELS. Yes, sir. And the issue it seems to surround that, our position has always been our ''Whois'' database is and always has been available to the general public on an interactive basis for the purpose of looking up various data fields associated with specific domain names. We have done everything in our power with the concurrence of the Department of Commerce to make that database available.

    Mr. BERMAN. Mr. Chairman, could I just ask on a yes or no basis, just the last two representations. The registrant's information will be verified as accurate by Network Solutions?
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    Mr. DANIELS. We have never from the start of the cooperative agreement, even before we acquired the company, ever been under an obligation under the cooperative agreement to verify every single piece of data. That has never been the procedure, ever, and it would take an enormous amount—potentially millions of dollars—to do exactly that task. That has never been the situation.

    Mr. BERMAN. So you are——

    Mr. DANIELS. 30,000 per day——

    Mr. BERMAN. You are one for two on these commitments. Let me ask the third one. That every registration search result will include all of the data elements required by the ICANN accreditation agreement?

    Mr. DANIELS. I would only tell you this, that we have extensive disagreement with what you reference as, ''all of the accreditation guidelines or agreements.'' Because one of the things they specifically ask for, whether people truly understand this or not, is that all intellectual property rights of any company in our interpretation would transfer to ICANN. And their bylaws could be changed at any time, so we have no stability of reliability of what ICANN might do on any business matter today or in the future.

    Mr. BERMAN. Mr. Chairman, I hate to do this, but that is just not quite responsive. Again, it is a narrow question. That every registration search result will include all of the data elements required by the ICANN accreditation agreement. Will the people who do this search get the information that ICANN has said under its accreditation agreement you should provide?
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    Mr. DANIELS. I would say yes, subject to privacy concerns. And that is a very unclear issue.

    Mr. BERMAN. Thank you, Mr. Chairman.

    Mr. COBLE. The gentlemen from Virginia, Mr. Goodlatte.

    Mr. GOODLATTE. Thank you, Mr. Chairman. Mr. Daniels, I have got a copy of an abcnews.com article dated July 27 that indicates that your company has announced plans to offer a new Internet-based service allowing people to look up information from the database combined with background business information from other sources. And your spokesman is quoted as saying, ''In thousands of cooperative agreements between government and industry, it is very clearly contemplated that intellectual property goes to industry.''

    I am wonder ing if you can tell me where exactly in the cooperative agreement that NSI has with the Department of Commerce that it states that intellectual property goes to your company?

    Mr. DANIELS. I would be glad to furnish all of that data to the committee. We will certainly do that. The statements from Dr. Bardonia in professional testimony as well as the letters from the National Science Foundation, General Counsel, the people who requested data under the Freedom of Information Act very specifically stated that the awardee, Network Solutions, owned all of the data and intellectual property around it.

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    Mr. GOODLATTE. In the cooperative agreement?

    Mr. DANIELS. That is the way the cooperative agreement is interpreted by the National Science Foundation since issuing the cooperative agreement. The Department of Commerce simply took over the administration recently.

    Mr. GOODLATTE. Now, you recently announced plans to offer new Internet based service to allow people to look up information on the ''Whois'' database. This seems to suggest that NSI's plans to limit direct access to the ''Whois'' database itself. Is this the case?

    Mr. DANIELS. No, it's not. May I explain my answer?

    Mr. GOODLATTE. Please.

    Mr. DANIELS. In long tedious negotiations over the last year with the Department of Commerce, we agreed to spend now $14 million to build a shared registration system to allow everyone who wants to come in and compete with us. We have spent to date $234 million of our own money to develop the registrar business. The Department of Commerce in agreement with us, fully agreed with Department of Commerce in writing, has split the business into a registry function and a registrar function allowing everyone who wants to compete. That is just fine with us. We believe that is a good thing on the registrar level. But on the registry level there will be a very thin layer, as we have all talked about it for over 2 years, of data that would be basic information. That information is available as it is today to everyone. Everyone who is a registrar who is going to compete in this is going to have their own database of customer information which they are going to consider completely proprietary, just like a Sprint or AT&T or anyone who considers their customer data proprietary. Our business is now split where we are also a registrar. All of that data is proprietary customer data to us as a registrar.
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    The announcement of the ''dot com directory,'' which we received a letter from Mr. Pincus after close of business last Friday, so we were unable to even look at it until Monday morning, when the press was full of this on Monday morning said that they had no objection to our new service. What they did say specifically, and we are happy to furnish a copy of that to the committee, was our apparent thought about restricting access to the ''Whois'' database or to the TLD zone file. Those were the two issues.

    Now, our agreement, which is in writing with the Department of Commerce, which I am confident that Mr. Pincus is well aware of, has to do with the access to data in both of those situations. Over many months in developing the technical specifications and policies and procedures of this shared registration system which we have built and put in place to allow competition, we have agreed to what the levels of access should be for all of this.

    Mr. GOODLATTE. Let me ask you this in that regard. In September of next year, September of 2000, your cooperative agreement with the Department of Commerce ends. At that time NSI will have no accountability to the department but will under your legal theory have ownership of all of the data of the ''Whois'' database. When the United States government loses the stick of the cooperative agreement, how can this committee be sure that NSI will not unilaterally cut off access to the ''Whois'' database?

    Mr. DANIELS. Well, as chairman of the board of Network Solutions, I can tell you that we never have done that and we will not do that in the future. That would not be good for our company nor would it be good for anyone in the public interest or any competitor worldwide. We will not do that.
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    Mr. GOODLATTE. Thank you. I appreciate that answer. Mr. Stubbs, several people here today have questioned Network Solutions's claim that own the ''Whois'' database. I am curious, however, about whether you believe that you would have a similar claim to the database containing the contact information of your registrants once CORE is fully competing in registering domain names, and also what are your plans for ensuring that your database remains open to the public?

    Mr. STUBBS. Sir, CORE's position basically is that that database is public property, and we will follow whatever instructions that we receive from ICANN and from general consensus in the Internet community as to what they feel is best with the treatment of that data. We, on the contrary, are making every possible effort to ensure that every piece of information regarding our registrations is available to whoever wishes it. We are more than willing to go beyond what ICANN has requested in terms of requiring data.

    Initially, and this is a response to Mr. Brown's concern, we had an RS lookup system in place when we went up. We were concerned because of the fact that the ''Whois'' information that we were providing was technically very difficult to be used on an inclusive basis. So we took the extra time so that now when you go to our ''Whois'' site, which is web based, you get access information from all of the registries. Network Solutions will not provide you on their registrars site ''Whois'' information on any domain that has been registered by one of the competing registrars. We feel that because it is a public trust we want to offer as much information as possible. So we took the extra time to design a ''Whois'' based system that gave access to all of this. So no matter what domain you look up, we will tell you on our site, on our registrars site, who owns it and where it was originally registered by.
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    Mr. GOODLATTE. So in order to be completely useful to somebody, you would have to be able to do this all in one——

    Mr. STUBBS. Absolutely. The example that she gave only presumes that—if she goes to NSI's ''Whois'' site, all you are going to get is their data. In every major registry in the world—the United Kingdom, France, Australia, Germany—every registry in the world, that ''Whois'' function belongs at the registry level so that you get a comprehensive lookup. You have the assurance that what you are getting is a complete look at all of the data that is available. The only place it doesn't happen is here in the U.S. The reason for that very simply is because they were given the option of designing the system with the registry and the registrar. They decided to pass that responsibility down to a registrar basis, along with resolution dispute and along with the filtering process. All of that should have remained at the registry. They wanted a thin registry. Frankly, we were surprised to see it because we were informed of it literally with 48 hours—within 48 hours of when we were also told that we were accredited by ICANN. We didn't even know that that was going to be the case.

    Mr. GOODLATTE. Mr. Chairman, my time has expired, but I wonder if I might have another minute or two to allow Mr. Daniels to respond to that.

    Mr. COBLE. Without objection.

    Mr. DANIELS. I would very much like to respond, if I may. This continued use in every hearing and the newspaper of they did this and they did that is not constructive for the following reason. What you have just heard described to you is discussed in detail for almost 9 months with the Department of Commerce, who asked that we have an international technical group come and work with us to design the shared registry system. They did that. This was reviewed fully by technical experts. That system was signed off in writing by the Department of Commerce. So this continual line that we have done this and we have done that is just in that case not true. Notice was given, people had plenty of opportunity through the mechanism of the technical working group through the Department of Commerce to come and have every input. That was negotiated in detail. The entire system specification of dividing the business into the registry and what it was like specifically, and registrar, was signed off by the technical advisory board under the auspices of the United States Department of Commerce.
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    Mr. GOODLATTE. In that regard, Mr. Daniels, is Mr. Stubbs correct that when one goes to your database you are not going to find information about domain names registered at other competing entities?

    Mr. DANIELS. That is exactly right because that is the way that the technical specification was agreed to and signed off on by the Department of Commerce.

    Mr. GOODLATTE. Why would that be desirable though?

    Mr. DANIELS. Because the entire concept, whether right or wrong, which we have spent our money to implement under the auspices of the Department of Commerce is to split this entire business into a registry, which is a thin layer of data on one level, and at the other level everyone can compete freely and do whatever they want, which is called registrar.

    Mr. GOODLATTE. Why would you not want to serve your customers with complete information that would allow them to have information about other registrants assigned a domain name, so that somebody going to you would be able to know the full picture? It seems to me it would be a more attractive reason to come to your site knowing they could find out all of the information they need to find out.

    Mr. DANIELS. We are going to build all of our data, as is everyone who is competing with us, at the registrar level. You can have full and complete databases, information at that level. That is what the entire concept of introducing competition over the last 2 years of discussion with the international community has been. And all I could say to you is I do not see other industries, such as phone companies, sharing their proprietary customer data in full extent. We have problems of spamming. Our systems are hacked 500 times a day by people trying to disrupt the stability and reliability of the systems that we run and maintain for everybody's interest.
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    Mr. GOODLATTE. There is in the Telecommunications Act a specific requirement that phone companies share information about which they have specific data.

    Mr. COBLE. Mr. Daniels, just a minute. Mr. Goodlatte, your time has expired. How about you taking the second round because we need to get moving here. Let me come back to you in your second round and let me recognize the gentlelady from California.

    Mr. GOODLATTE. Thank you, Mr. Chairman.

    Ms. LOFGREN. Thank you, Mr. Chairman. This is an interesting line of discussion. I think it gets back to the question that was being pursued by my colleague, Mr. Berman, earlier, which is whatever agreement has been made with the Department of Commerce or was made with the National Science Foundation, I would be interested in the legal theory being relied on by NSI relative to the Feist case. I am

    wondering—I know, Mr. Daniels, you said that you were not familiar with that—but I wonder if it would be fair to ask your counsel sitting next to you if he would share that with us.

    Mr. SBARBARO. Congresswoman Lofgren, thank you. If you are speaking of the Feist case and if I am correct that it discusses copyright rights, if that is correct, I don't believe Network Solutions is asserting a copyright interest. It is asserting a number of other interests.

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    Ms. LOFGREN. What interests specifically? What ownership interests are you asserting?

    Mr. SBARBARO. Well, besides what—the normal rights that pass pursuant to 31 USC Section 6305, that is the nature of a cooperative agreement. So this cooperative agreement isn't any different than any other cooperative agreement the National Science Foundation has ever issued. So the recipient is an awardee and receives something from the United States Government. For that it assumes all of the risk, all of the liability, and makes all of the investment. That is what Mr. Daniels was talking about.

    Ms. LOFGREN. If I can, then—I appreciate everybody here has a different—is sitting in a different seat with different obligations they have. I respect that. NSI has shareholders and you have obligations to them. We don't have obligations to them. We have the obligation to make sure that this whole thing works for the American people. I just want pursuant to that, you made a comment earlier during your opening statement, Mr. Daniels, that the infrastructure or the fragility of the infrastructure was greater than people generally believed. Could you explain that comment, please?

    Mr. DANIELS. I would be glad to. People are under the assumption that we are going to build trillions of dollars of electronic commerce business on this Internet infrastructure. I began my career at ARPA in 1969 when the first dollars were ever put into the ARPAnet. I have watched its development, and for me this is a 30-year historical journey, if you will. The answer to your question is the types of things that concern me very much, that honestly keep me up at night, which we have talked at great length with the U.S. Government at the Department of Commerce about are as follows: The entire root zone system. When we set that up historically years ago, there were 13 root zone servers around the world. The first thing that anyone who is familiar with that knows is a large number of those are operated by volunteers. They are not even manned 7 days a week, 24 hours a day. We have to man the two servers 24 hours a day, 7 days a week. If there is a problem with that system somewhere, it has the potential to bring the entire Internet down.
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    Ms. LOFGREN. So that is all you meant by that statement?

    Mr. DANIELS. No. Number two is the Y2K problem. In writing I sent a letter to the Department of Commerce in December and I specifically told them that we were enormously concerned about this system potentially failing on January 1 of 2000.

    Ms. LOFGREN. Are those two primarily what you meant by the statement?

    Mr. DANIELS. I am very concerned about those two issues.

    Ms. LOFGREN. I don't mean to downplay them, but if you could just list the issues, that would be helpful.

    Mr. DANIELS. Well, the third thing that I am very concerned about is the discussions that go on about how are we going to govern any of this in the future. I think those are potentially some of the key questions that we are asking. There is no stability that I can see from now having sat through a week of hearings here on Capitol Hill of all parties who come here. They say things like, we will do this in the future, we think we will do that in the future, we are not sure how that is going to operate.

    If I were sitting—if I may say that—in your position, I would be very concerned about this because I have to run a business day and night that has now brought 5 million people as users onto the Internet. I have to make sure as much as humanly possible that individuals, small businesses, and major corporations get onto those systems. I know how fragile it is. There are technical problems that occur day and night with this entire system. And to think that we can talk about what is going to go on while this is all happening today, and it is happening today, is a problem.
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    Ms. LOFGREN. If I could move on to Mr. Roberts. The thinking about the sharing of databases, for lack of a better word, the shared registry, I didn't get anything from what Mr. Daniels said that would be an impediment to having the kind of common access to data suggested by some of the other panelists. Do you see an impediment and does ICANN?

    Mr. ROBERTS. Well, the community at large very much wants to unify ''Whois'', and there have been discussions going on for some months as to how to achieve that. There are both technical issues as well as economic and legal issues. We are looking forward to the Department of Commerce providing leadership to resolve those to the extent that it has oversight and control over the outcome.

    Ms. LOFGREN. If I could just quickly follow up, Mr. Chairman. We are exploring the legal issues and the policy issues, but there is no technical impediment that would prevent that result that you can tell us about?

    Mr. ROBERTS. Not at all. This is a very common database technology and real time environment.

    Ms. LOFGREN. That is what I thought. Thank you, Mr. Chairman.

    Mr. COBLE. Thank you. In our effort to be witness friendly, let me ask the gentleman from Utah if he has questions for Mr. Cohen or Mr. Kirk.

    Mr. CANNON. I think, Mr. Chairman, there are millions of questions for all of them, but I am willing to forego questions for them.
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    Mr. COBLE. Why don't we permit Mr. Cohen and Mr. Kirk to go ashore, to use a nautical term, and I will then recognize the gentleman from Utah. Thank you. Good to have you both with us, gentlemen.

    Mr. CANNON. Thank you, Mr. Chairman. Mr. Daniels and Mr. Sbarbaro, whichever of you has the most understanding here, is NSI registering obscene and hate words currently on ''.com'', ''.org'', and ''.net''?

    Mr. DANIELS. If I may speak to that, you asked a previous question that I would like to answer and then I will let Mr. Sbarbaro be very specific.

    Mr. COBLE. This won't go against your time. Mr. Cannon, I didn't hear your question. Would you please repeat the question.

    Mr. CANNON. The question is: Is NSI currently registering the seven obscene or hate based words on .net, .com, or .org?

    Mr. COBLE. I'm sorry. I didn't hear the question initially. Thank you.

    Mr. DANIELS. Mr. Cannon, since mid-1996, Network Solutions' policy, and we have chosen that as a matter of our company policy, was not to register those types of words.

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    Now, you asked an earlier question which I would like to respond to. We did have a discussion with the Department of Commerce about this matter, and we have copies here which we will give the committee of the agreement that they asked be changed. I was very, very concerned about this because my anticipation was that when new competitors came into the marketplace, the first place that would hit the United States Congress and the press would be that Network Solutions in some way, shape, or form was now allowing filthy words to be distributed. I anticipated that would happen. So I wrote Ms. Beckwith Burr—and I will give a copy to this committee—after talking with her on April 30, 1999, the following letter.

    Dear Mrs. Burr, if I may read this, sir.

    Mr. CANNON. If you could just digest because of my time and submit it for the record, I would appreciate it.

    Mr. DANIELS. I will. We said we will not do that, and, now that you have asked that we introduce competition, what do you want done about this? Their answer was very specific, that you have no control over it, registrars from this point on can do whatever they want to.

    Mr. CANNON. Are you saying, Mr. Daniels—because Mrs. or Ms. Burr testified—that she didn't know this was an issue, you wrote her a letter, you spoke with her, and her response—so she knew more than apparently she said to us——

    Mr. DANIELS. She may have forgotten. I will give you the entire correspondence. She said, ''As you said—'' and I quoted her—''it is up to the individual registrars to decide.'' I asked her—thanked her for confirming that.
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    Mr. CANNON. May I just interject with another question. Did people at the Commerce Department understand that something in your negotiations would result in words not being filtered, either through some contractual negotiation or otherwise? We didn't have dirty words and all of a sudden we had them. Why did that happen and did the Department of Commerce, did Mr. Pincus or Ms. Burr understand what was going on there?

    Mr. DANIELS. I sat in the session where the agreements were discussed. I believe they did.

    Mr. CANNON. Mr. Sbarbaro, do you have something to add to that?

    Mr. SBARBARO. Thank you, Congressman, yes. Between February 23rd when those provisions were in the agreement between the registry and all of the other registrars and the next time it was negotiated on or about April 15, those words are gone. So now one of CORE's registrars are registering those words and we have those all over the Internet.

    Mr. CANNON. That negotiation you referred to is between NSI and the Department of Commerce?

    Mr. SBARBARO. Every word of the registrar, license, and agreement, that is correct.

    Mr. CANNON. You had to negotiate your agreements of registrars with the Department of Commerce?
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    Mr. SBARBARO. Every word.

    Mr. CANNON. Were they aware of the implications of the change in that agreement between you and the registrars as to obscene words?

    Mr. SBARBARO. Not only were they aware, Congressmen, we had quite a debate because one thing continues to exist in that agreement. That is that we would not subject the registry to criminal liability under Federal statute.

    Mr. CANNON. That was part of your discussion with the Department of Commerce?

    Mr. SBARBARO. Of course it was.

    Mr. CANNON. Who was that within the Department of Commerce you had that discussion with?

    Mr. SBARBARO. Ms. Burr and Mark Bohannon.

    Mr. CANNON. Thank you as to that. Mr. Stubbs, have your members profited from the selling of obscene or pornographic names or from registering obscene or pornographic names?

    Mr. STUBBS. Well, sir, if I could take a minute to expound on that.
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    Mr. CANNON. I don't have a minute. Do you have members who have profited from obscene——

    Mr. STUBBS. We have members that are registering these names, that is correct, sir, but——

    Mr. CANNON. Is it true that your members are the first to do so?

    Mr. STUBBS. No, sir. They are the first to have registered the seven names, the seven words that you are talking about, yes. But not obscene names. There are significant numbers of obscene names that have been granted.

    Mr. CANNON. Granted, there are all kinds, but these are a particular set. Has CORE donated to the operations budget for ICANN?

    Mr. STUBBS. No, sir. We have not made any donations at this point in time to ICANN at all. The registrars, the 57 registrars that have accredited as test bed registrars, including registrars that are non-CORE members, are voluntarily, many of them are voluntarily offering to continue or to pay the one dollar fees because we feel that ICANN needs to be supported. But many of the registrars there who have made that commitment, and at this point in time there has not been any funds given to ICANN by CORE or none of the registrars as far as I know, sir.

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    Mr. CANNON. As far as you know none of the registrars——

    Mr. STUBBS. I can't speak for everyone because I am not certain. There may be a registrar that we don't know of them. No CORE members, as far as I know.

    Mr. CANNON. Thank you. Let me ask you, Mr. Daniels, or Mr. Sbarbaro, about a more general question. It appears to me that this policy stated by Mr. Pincus to internationalize or globalize the controlling influence over the Internet is a matter of concern. Mr. Daniels, you said you were with DARPA originally when this all started. America has invested a huge amount of money. It seems to me that the Internet is the most American of all modern tools. It will have a tendency to actually change the rest of the world into the way that we do things. Is there a problem with globalizing it, with bringing in people who have much less presence on the Internet and giving them more say about where we are going?

    Mr. DANIELS. The problem is, Mr. Cannon, that the original discussion—and I sat in on that in the White House about what a nonprofit should be—was to be a technical standard setting body and have no regulatory authority or policy-making role. We do have a problem. The problem now is we have people who have all types of interests who are on an Interim Board who I couldn't tell you, nor is there a person in this room or anywhere in this country can tell you what they are going to decide tomorrow.

    Mr. CANNON. Thank you, Mr. Sbarbaro. I am over my time, if the chairman will allow me——

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    Mr. COBLE. Go ahead. One more question and we will start our second round.

    Mr. CANNON. I don't have another question. I would just like to have Mr. Sbarbaro respond. Also, Mr. Daniels, if you could submit the documentation of your negotiations with the Department of Commerce, I would appreciate that.

    Mr. DANIELS. Yes, sir, we will do that.

    [The information referred to follows:]


Network Solutions,
Herndon, VA, August 11, 1999.
Hon. HOWARD L. BERMAN,
Committee on the Judiciary,
House of Representatives, Washington, DC.

    DEAR REPRESENTATIVE BERMAN: Thank you for your letter of July 29, 1999, concerning my testimony as Network Solutions, Inc.'s (''NSI'') Chairman of the Board of Directors. You raised four questions about the ''privacy concerns'' I referred to in connection with my July 28, 1999 testimony before the Courts and Intellectual Property Subcommittee regarding access to the WHOIS database. You also inquired about the steps NSI is taking to improve the quality of the data accessible via the WHOIS service.

    NSI is sensitive to the current public debate about how to strike an appropriate balance between the privacy interests of individuals who use the Internet (including domain name registrants) and the interests of those who are interested in collecting and using the personal information provided by those individuals. We likewise understand and appreciate how accurate contact information for domain name registrants can enable intellectual property owners to enforce their rights efficiently and quickly.
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    As the discussion below illustrates, the topic of online privacy rights is receiving widespread attention from lawmakers in the United States and abroad. It is difficult to predict how the 'United States and foreign governments will balance those interests against the interests of the public in accessing registrant data. When that balance is struck, NSI stands ready to comply with these developing standards. With regard to your questions concerning the accuracy of domain name registrant information, we will continue to investigate and hold domain name registrants accountable for inaccuracies that are brought to our attention. We are also exploring ways of improving the reliability of this information, such as by cross checking the information against public information sources.

    Set forth below are my responses to your specific questions.

PRIVACY QUESTION

Question 1

  Was your reference to ''privacy concerns '' a reference to applicable privacy laws and regulations? If so, please identify the laws and regulations you believe are applicable. If not, or if you believe there are additional privacy restraints on your disclosure of information, please describe the following: (])the privacy concerns you believe you have an obligation to address; (2) why these privacy concerns would require you to withhold registrant contact data from the public; (3) in what manner you currently are addressing these concerns; and (4) in what manner you anticipate addressing these concerns in the future.

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    Your first question seeks clarification about the ''privacy concerns'' I referenced in my testimony regarding the public accessibility of the WHOIS database. Because I was referring not only to existing privacy laws and regulations, but also to other privacy restraints, I have addressed the four subparts of your question below.

Part 1 of Question 1—Describe the privacy concerns you believe you have an obligation to address.

    The Clinton Administration directed the U.S. Department of Commerce to work with the private sector in developing and implementing effective self-regulatory privacy regimes that cover electronic information practices. Pursuant to the Administration's directive, the National Telecommunications and Information Administration (''NTIA'') published a report to the President on the elements of effective self-regulation for the protection of privacy. The report sets out the following nine specific characteristics of effective self-regulation for privacy:

 awareness

 choice

 data security

 data integrity

 consumer access
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 accountability

 consumer recourse

 verification

 consequences

See 63 Fed. Reg. 30730 (1998).

    We are working closely with the Administration on these issues and are supportive both of the self-regulatory approach and the principles underlying that approach.

Part 2 of Question 1—Describe why these privacy concerns would require you to withhold registrant contact data from the public.

    While the Administration supports a self-regulatory framework for protecting individuals' privacy, the European Union has taken a legislative approach to this issue. The European Union's comprehensive privacy legislation, the Directive on Data Protection, became effective on October 25, 1998. The EU Directive prohibits the transfer of personal data to third countries that do not provide an ''adequate'' level of privacy protection. The EU Directive broadly defines personal data as:

any information relating to an identified or identifiable natural person (''data subject''); an identifiable person is one who can be identified, directly or indirectly, in particular by reference to an identification number or to one or more factors specific to his physical, physiological, mental, economic, cultural or social identity.
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EU Directive Art. 2(a).

    Because Network Solutions registers domain names for individuals and entities all over the world, a significant number of the contacts listed in its WHOIS database are Europeans who may enjoy protection under the EU Directive. Information maintained about those individuals, such as their names, email addresses and postal addresses, falls within the EU Directive's broad definition of personal information.

    Because the United States relies largely on a sectoral and self-regulatory approach to privacy protection, many U.S. organizations are uncertain about the impact of the ''adequacy'' standard on personal data transfers from the European Community to the United States. What is clear, however, is that Article 25(4) of the EU Directive requires member states to.'?take the measures necessary to prevent any transfer of data of the same type to the third country in question7 where adequate protection is not provided. Such a restriction could have dramatic consequences on Network Solutions' or any registrar's ability to register domain names for Europeans.

Part 3 of Question 1—Describe in what manner you currently are addressing these concerns.

    We are actively monitoring ongoing negotiations between the U.S. Department of Commerce and the Directorate General XV of the European Union to find ways of bridging the differences in their respective privacy protection regimes.

    In an attempt to minimize the uncertainty that has arisen about the Directive's effect on transborder data transfers from the European Community to the United States, the Department of Commerce and the European Commission have discussed creating a safe harbor for U.S. companies that choose voluntarily to adhere to certain privacy principles. While the specific terms of the safe harbor arrangement are still under discussion with the European Commission, we believe that it is the position of the Department of Commerce that organizations that decide to take advantage of the safe harbor would benefit in the following ways:
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 all fifteen Member States would be bound by the Commission's recognition of the safe harbor principles as adequate;

 the scope of any legal action by European citizens contesting data transfers under the Directive would be narrowed to alleged noncompliance with stated practices rather than addressing adequacy of the safe harbor privacy principles;

 in those EU Member States that require prior approval before data transfers can occur, organizations that qualify for safe harbor protection would either not have to seek such approval or would, as a general rule, have their applications automatically approved; and

 the organization would have access to streamlined and expedited procedures in the event of a dispute.

    The Department of Commerce most recently outlined the safe harbor principles in its latest draft International Safe Harbor Privacy Principles, dated April 19, 1999, a copy of which is enclosed. The Department of Commerce had originally set a deadline of June 21, 1999 for reaching agreement with the EU and finalizing the safe harbor principles. According to a joint report prepared on June 21, 1999 by the European Commission and the Department of Commerce, the two sides now plan on finalizing these principles in the Fall of 1999.

    For over a year, NSI has been actively evaluating its information practices to identify those practices that may be covered by the EU Directive. During that time, we have also worked-,on developing a privacy policy that would address requirements of the EU Directive.
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Part 4 of Question 1—Describe in what manner you anticipate addressing these concerns in the future.

    Network Solutions will continue to monitor this situation closely and prepare itself to comply with any legal requirements that might be imposed. We would be pleased to keep you and the Committee apprised of developments.

OUALITY OF DATA QUESTION

Question 2

    What steps, if any, is NSI taking to screen out . . . obviously false data and to improve the quality of the data accessible via Whois?

    In 1993, when NSI began performing under its cooperative agreement with the National Science Foundation, the speed and efficiency of registering domain names on our legacy system was very important. Indeed, the cooperative agreement under which we developed this system expressly contemplated an automated registration system and did not contemplate a need to verify information provided by registrants at the time of registration. Today, we receive approximately 10,000 to 15,000 applications per day, or one every 5 to 10 seconds. At that volume, the vast preponderance of applications are completely computerized and processed without human intervention.

    It is important for NSI to have accurate registrant information in order to render its services and communicate with its customers. Without accurate information, NSI could not properly service and invoice its customers. Indeed, it is in the customer's own best interest to provide NSI with accurate information.
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    Recognizing that we do not always receive accurate information, we long ago established a procedure that attempts to correct any critical information on any registration record, once it is brought to our attention. Upon notification from a third party that their attempts to contact a domain name holder have gone unanswered and mail has been returned, NSI immediately attempts the same contact. If the domain name holder does not respond to NSI's inquiry within thirty days, the domain name registration agreement is first disabled and then if there is still no response, is terminated and the domain name is deleted from the database.

    Each registrant is required, under the terms of its registration agreement with NSI, as a registrar, to keep its information current and complete. A substantial failure is considered a material breach of contract. This procedure is identical to the resolution recommended by the World Intellectual Property Organization in its Report of April 1999. The WIPO recommendations 119 and 120 have been a practice of Network Solutions for several years.

    In addition to sheer volume and the automated nature of the process, privacy concerns must also be considered. Because the Whois data is visible to anyone, the submission of ''false'' information is sometimes an individual's only protection against unwanted spamming, direct market mail campaigns, and telemarketers that use the Whois data to prepare ''contact'' lists. Many individuals use their office address or their parents' name or an office telephone number to avoid disclosure. The information could technically be considered inaccurate but such an unfortunate interpretation could have a chilling effect on this new, international means of communication. Additionally, in the context of processing a domain name registration or record modification on average of every 7.5 seconds, 24 hours a day, seven days a week, without interruption, equipping and operating a domain name system capable of performing even a minimum set of validity checks would be impracticable. Nevertheless, Network Solutions is exploring the feasibility of implementing basic cross checks that would compare, for example, zip codes, area codes, and city names. As the WIPO report correctly stated, there are other validity checks that bear careful consideration.
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    If you have any additional questions or concerns, please do not hesitate to contact me.

Best regards,


Michael A. Daniels, Chairman of the Board,
Network Solutions, Inc.
INTERNATIONAL SAFE HARBOR PRIVACY PRINCIPLES

    The European Union's comprehensive privacy legislation, the Directive on Data Protection (the Directive), became effective on October 25, 1998. It requires that transfers of personal data take place only to non-EU countries that provide an ''adequate'' level of privacy protection. While the United States and the European Union share the goal of enhancing privacy protection for their citizens, the United States takes a different approach to privacy from that taken by the European Community. The United States uses a sectoral approach that relies on a mix of legislation, regulation, and self regulation. Given those differences, many U.S. organizations have expressed uncertainty about the impact of the EU-required ''adequacy'' standard on personal data transfers from the European Community to the United States. Personal data is data about an identified or identifiable individual that is recorded in any form.

    To diminish this uncertainty and provide a more predictable framework for such data transfers, the Department of Commerce is issuing these principles under its statutory authority to foster, promote, and develop international commerce. The principles were developed in consultation with industry and the general public to facilitate trade and commerce between the United States and European Union. They are intended for use solely by U.S. organizations receiving personal data from the European Union for the purpose of qualifying for the safe harbor and the presumption of ''adequacy'' it creates. Because these principles.were solely designed to serve this specific purpose, their adoption for other purposes may be inappropriate.
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    Organizations may qualify for the safe harbor in different ways. If an organization joins a private sector developed privacy program that adheres to these principles, it qualifies for the safe harbor.

    Where an organization is subject to US statutory, regulatory, administrative or other body of law (or body of rules issued by national securities exchanges, registered securities associations, registered clearing agencies, or a Municipal Securities Rule-making Board) that also effectively protects personal data privacy, it qualifies for the safe harbor to the extent that its activities are governed by such laws or rules, Organizations may also put in place the safeguards deemed necessary by the EU for transfers of personal data from the EU to the US by incorporating the relevant safe harbor principles into agreements entered into with parties transferring personal data from the EU.(see footnote 28)

    Decisions by organizations to qualify for the safe harbor are entirely voluntary, but organizations that decide to adhere to these principles must comply with these principles in order to obtain and retain the benefits of the safe harbor as described in XXXXXXXX and publicly declare that they do so. All organizitions qualifying for the safe harbor should for purposes of transparency and other beneficial reasons notify the Department of Commerce or its nominee in accordance with the guidance set forth in XXXXXXXX.

    In addition to any exceptions provided for by the Directive and EU Member State law,(see footnote 29) adherence to these principles may be limited to the extent necessary to meet US national security, public interest, and law enforcement requirements as well as other US statutory and regulatory provisions. Adherence to these principles is not required for participation in the safe harbor where data is manually processed.(see footnote 30)
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Safe Harbor Principles

    1. NOTICE: An organization must inform individuals about the purposes for which it collects information about them, how to contact the organization with any inquiries or complaints, the types of third parties to which it discloses the information, and the choices and means the organization offers individuals for limiting its use and disclosure. This notice must be provided in clear and conspicuous language when individuals are first asked to provide personal information to the organization or as soon thereafter as is practicable, but in any event before the organization uses such information for a purpose other than that for which it was originally collected or discloses it to a third party.

    2. CHOICE: An organization must offer individuals the opportunity to choose (opt out) whether and how personal information they provide is used or disclosed to third parties (where such use is incompatible with the purpose for which it was originally collected or with any other purpose disclosed to the individual in a notice). They must be provided with clear and conspicuous, readily available, and affordable mechanisms to exercise this option. For sensitive information, such as medical and health information, information revealing racial or ethnic origin, political opinions, religious or philosophical beliefs, trade union membership or information concerning the sex life of the individual they must be given affirmative or explicit (opt in) choice.(see footnote 31)

    3. ONWARD TRANSFER: An organization may only disclose personal information to third parties consistent with the principles of notice and choice. Where an organization has not provided choice because a use is compatible with the purpose for which the data was originally collected or which was disclosed in a notice and the organization wishes to transfer the data to a third party, it may do so if it first either ascertains that the third party subscribes to the safe harbor principles or enters into a written agreement with such third party requiring that the third party provide at least the same level of privacy protection as is required by the relevant safe harbor principles.(see footnote 32)
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    4. SECURITY: Organizations creating, maintaining, using or disseminating personal information must take reasonable measures to assure its reliability for its intended use and reasonable precautions to protect it from loss, misuse and unauthorized access, disclosure, alteration and destruction.

    5. DATA INTEGRITY: Consistent with these principles, an organization may only process personal information relevant to the purposes for which it has been gathered. To the extent necessary for those purposes, an organization should take reasonable steps to ensure that data is accurate, complete, and current.

    6. ACCESS: Individuals must have (reasonable] access to personal information about them that an organization holds and be able to correct or amend that information where it is inaccurate. (Reasonableness of access depends on the nature and sensitivity of the information collected, its intended uses, and the expense and difficulty of providing the individual with access to the information.](see footnote 33)

    7. ENFORCEMENT: Effective privacy protection must include mechanisms for assuring compliance with the safe harbor principles, recourse for individuals to whom the data relate affected by non-compliance with the principles, and consequences for the organization when the principles are not followed. At a minimum, such mechanisms must include (a) readily available and affordable independent recourse mechanisms by which an individual's complaints and disputes can be investigated and resolved and damages awarded where the applicable law or private sector initiatives so provide; (b) follow up procedures for verifying that the attestations and assertions businesses make about their privacy practices are true and that privacy practices have been implemented as presented; and (c) obligations to remedy problems arising out of failure to comply with these principles by organizations announcing their adherence to them and consequences for such organizations. Sanctions must be sufficiently rigorous to ensure compliance by organizations.
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    Note. Mechanisms for assuring compliance with the safe harbor principles may take different forms. Organizations may satisfy the requirements set forth in Principle 7 through the following mechanisms: (1) through compliance with private sector developed privacy programs that include effective enforcement mechanisms of the type described in Principle 7; (2) through compliance with legal or regulatory supervisory authorities; or (3) by committing to cooperate with data protection authorities located in the European Community or their authorized representatives, provided those authorities agree. This list is intended to be illustrative and not limiting. The private sector may design other mechanisms to provide enforcement, so long as they meet the requirements of these principles.(see footnote 34)

    Mr. SBARBARO. Congressman Cannon, the problem isn't from my point of view internationalization of the Internet. I think that is a wonderful thing. I think we all do. It breaks every border down worldwide, where someone from Bosnia can send something to someone in California or Utah in roughly 3 seconds. The problem is power and control and if that transfers away from the United States. I think Congressman Pickering said it very well: It is American and it probably ought to stay American for a while.

    Mr. COBLE. The gentleman's time has expired. I submit an apology to the gentleman from Massachusetts. I think I inadvertently overlooked him and I now recognize him for the first round of questioning.

    Mr. DELAHUNT. Thank you, Mr. Chairman. And it is seldom that you overlook me so I am not concerned about that at all. I want to go back to the Feist decision. I really want to understand your position, Mr. Daniels, and Mr. Sbarbaro. I think it was you, Counsel Sbarbaro, who indicated that you are not in any way relying on your position of ownership predicated on Feist. Is that a fair statement?
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    Mr. SBARBARO. Congressman, if I understand—I haven't read Feist in a long time. If I understand Feist, that is correct.

    Mr. DELAHUNT. And you claim an ownership interest based on the cooperative agreement between the U.S. Government and NSI.

    Mr. DANIELS. That is correct. Plus we claim ownership rights along a variety of intellectual property areas because we currently have the 5 million customers with 2 year——

    Mr. DELAHUNT. You said ''intellectual property areas.'' When you talk about ''intellectual property'' you are talking about copyrights and patents and trademarks. I don't want to quibble, but that is a legal term, Mr. Daniels. So it is not in addition to the cooperative agreement. Do you have anything copyrighted or patented that you are basing your right of ownership on?

    Mr. DANIELS. If I may let Mr. Sbarbaro, I am not an expert on that at all.

    Mr. SBARBARO. Let me back up, Congressman. If the United States Government grants Boston College or Holy Cross——

    Mr. DELAHUNT. Where are those colleges?

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    Mr. SBARBARO. Somewhere in Massachusetts.

    Mr. DELAHUNT. You have done your homework.

    Mr. SBARBARO. I went to one of them. If it grants one of them the cooperative agreement——

    Mr. DELAHUNT. Right, but I want to be really clear. Mr. Daniels made a statement that in addition to the cooperative agreement there were intellectual property rights in existence.

    Mr. SBARBARO. Yes, there are.

    Mr. DELAHUNT. Again, I am sure Mr. Daniels said that in good faith. But you are not basing your ownership on any—as we understand it as attorneys—any intellectual property rights?

    Mr. SBARBARO. No, that is incorrect. That is just the source of the property rights. Then you have contractual rights with 5 million people and we have the obligation to perform on those.

    Mr. DELAHUNT. I understand that, but that is a contractual right as opposed to an intellectual property right.

    Mr. SBARBARO. They are the intellectual property rights of Network Solutions being identified as the source for the last 6 years of registration services all over the world.
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    Mr. DELAHUNT. I would respectfully disagree, that that does not amount to an intellectual property right as I understand it in terms of either a patent, a trademark, or a copyright. I guess maybe what I am suggesting is that you are relying on what you perceive to be a contractual relationship encompassed in the cooperative agreement. Is that a fair statement?

    Mr. SBARBARO. That is correct. That is the source of the ownership rights, that is correct.

    Mr. DELAHUNT. So what we are saying here is that NSI entered into an agreement at some point in time with the United States Government, and as a result of that agreement a property right was conferred on NSI by the United States Government.

    Mr. SBARBARO. That is absolutely correct.

    Mr. DELAHUNT. I guess my question is I don't understand what right the United States Government could confer in terms of a property right that would survive a contractual relationship. I don't see a property right. This is the problem that I am having on an intellectual level with your position. In terms of ownership of what? The United States Government had no right in my opinion, no ownership rights to confer. That is what I would suggest is a major problem with your position. You must be relying on some language, and I haven't had a chance to read the cooperative agreement, but I presume there is some language in there that you feel very confident of in terms of the position that you stated. Does the Department of Commerce share your reading and your interpretation of that language as conferring a property right or do they disagree?
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    Mr. DANIELS. You address it and I will make a comment.

    Mr. SBARBARO. They obviously do not agree.

    Mr. DELAHUNT. So we have a conflict.

    Mr. SBARBARO. And that is why General Counsel Pincus said if you avoid that issue rather than arguing about who owns what, if you make sure that it is maintained the way that the United States wants it to stay, the issue resolves itself.

    Mr. DELAHUNT. You know, again, as Representative Lofgren indicated, I understand that you have a position and that you have an obligation to shareholders, et cetera. We are here listening to various witnesses, and our mandate is obviously the best, most sound public policy in terms of the protection of intellectual property rights. And what I am hearing is your assertion that the United States Government conferred, a property right upon NSI which I believe they never really had ownership of, and they did within this agreement provide you a monopoly, a monopolistic——

    Mr. SBARBARO. There are two issues. I will do the first one, and Mr. Daniels will do the second one.

    This committee is all about intellectual property rights. I would respectfully suggest that the last thing the committee should do is start taking intellectual property rights away from entrepreneurial investment corporations all over the world that invest in this kind of thing and make it happen.
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    Mr. DELAHUNT. I agree with you, if an intellectual property right exists. But what I guess I am saying is, from the position of the United States Government, it wasn't a very good deal. They conferred on you a for-profit company, a monopoly. And it appears to have been very successful, and I congratulate you.

    And clearly, Mr. Daniels, you have had 30 years in this particular industry and have participated in a remarkable transformation of our society. But from the perspective of the government, earlier it was mentioned by one of my colleagues we would have been better off to enter into an agreement with a nonprofit corporation and not had these problems.

    I see I am way over my time. I yield back.

    Mr. COBLE. I thank the gentleman.

    Let's start the second round. I apologize, folks, that we are over the dinner hour, but we will plow along.

    We have thorns and roses at the table. We have ignored the roses at the table. I want to go to Ms. Karg a minute.

    Ms. KARG. Thank you for classifying me that way, Mr. Chairman.

    Mr. COBLE. These guys are not thorns, but you understand.

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    Ms. KARG. I understand.

    Mr. COBLE. Ms. Karg, are you concerned that once the new registrars are fully competing with Network Solutions and registering domain names that they, too, may attempt to make ownership claims over their individual ''Whois'' database, and, what needs to be done to ensure these databases remain open to the public?

    Ms. KARG. On the specific ownership questions, I think that is probably something that I will leave to the registrars to fight out among themselves, because it seems to be an ongoing debate, and I don't think that I necessarily have the expertise to help you on that. But it is a concern for all intellectual property owners in terms of ''Whois'' going to excerpt their ownership rights to that information and, more importantly, the accuracy of the data in those directories and also the availability.

    Certainly if any of the registrars contemplate entering into some sort of arrangement where they are going to start limiting access to that information, whether that be due to privacy issues, due to licensing regimes or what have you, that is of concern to intellectual property owners who want to use those directories to enforce their rights.

    As I demonstrated to you right now, that type of a search on a ''Whois'' directory or similar directory is imperative for us to be able to quickly enforce our rights to implement the notice and take down procedures, et cetera, so we need to have full access to those databases at any time, day and night. I think that is something that is contemplated by the ICANN registrar accreditation agreement, and it is something that we need to have every registrar as they go live to commit to.
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    Mr. COBLE. Mr. Sbarbaro, your body language told me you wanted to be heard. I will give you a chance to be heard. Let me put a question to you and/or Mr. Daniels.

    MSNBC reported last week that a spokesman for Network Solutions stated that if the Department of Commerce attempted to strip NSI of its right to control the registration of domain names, that NSI would ''just take our customers, all 5.2 million of them and go elsewhere.'' this has a threatening ring.

    Mr. Daniels, you present a very unthreatening or nonthreatening demeanor. I am inclined to think you probably didn't say this.

    Let me ask you this, folks. If that is, in fact, an accurate quote, if the company would be willing to make such a threat and possibly destabilize the Internet, what do you all say in response to that?

    Mr. DANIELS. Well, first, if anybody at Network Solutions said that, I don't agree with it, and we won't do that.

    Secondly, we are caught in the middle of each and every one of these issues. We are looking and have worked for the last—since we acquired the company in March 1995, with the NSF, the Department of Commerce. We have talked with ICANN and everybody that is in the so-called Internet community, trying to find appropriate and right responses to each one of these very, very difficult issues that we are always caught in the middle of.
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    So everything we do we talk to the Department of Commerce about before we do anything. So we are not people who are out here trying to do things that are going to hinder the growth or the right ways for competition to evolve, because we have put our money in that and we stake our future on the fact that competition in all these systems is good for the growth of our country's economy.

    We are not going to do anything at Network Solutions that precludes people from growing this great resource that was developed in this country. We are not going to do that.

    Mr. COBLE. Mr. Daniels, let's fast forward to September, 2000. After September, 2000, will you continue to communicate with the Department of Commerce?

    Mr. DANIELS. 100 percent. We talk to them almost every day and in a very positive, friendly way.

    Mr. COBLE. Now, your able lawyer wants to be heard. Mr. Sbarbaro.

    Mr. SBARBARO. I thank you, Mr. Chairman. It is just respectfully in response to Congressman Delahunt.

    It could have perhaps been better to have it be a nonprofit corporation. The United States Government, through the National Science Foundation, paid over the 5 years $3,522,201 to Network Solutions. In response, Network Solutions paid to the National Science Foundation, through the infrastructure fund, $62,338,029. So respectfully, very respectfully, Congressman, I would suggest that this kind of corporation worked a lot better than a nonprofit corporation.
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    Mr. COBLE. Gentleman, my red light is on.

    I recognize the gentleman from California.

    Mr. BERMAN. Ms. Karg, you heard Mr. Daniels' comments regarding what they are willing and not willing to do. Do you feel comfortable that you will be able to continue—how do you feel about your ability to keep clicking and getting the information?

    Ms. KARG. Well, the ability to keep clicking is fundamental to all of us, and that is why we are here, obviously.

    In terms of what Mr. Daniels has said specifically, I believe that we have to have a certain level of trust here that this system is going to work, because, as he pointed out, it is very fragile right now. However, I think all intellectual property owners would feel much more secure if there was something that specifically stated that we were going to have access to those databases continued into the future. I have heard several proposals around Capitol Hill and elsewhere about trying to make confidential or anonymous registrations, for instance. This is just an avenue for the pirates to create a haven basically, because they are all going to fall into that category and want it.

    So I think as the registrars continue to develop how they are going to register these domains, data quality issues and data accuracy issues, they are fundamental to all of this. So I think we have to believe that the registrars intend to do that, but I would like to see something that holds them more to that.
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    Mr. BERMAN. Can ICANN be the enforcer of that?

    Ms. KARG. I think that the arrangement that is currently in place with the Department of Commerce, ICANN and WIPO all supplying some leadership guidance in this area, I think that it has worked well. It certainly has some bumpy roads ahead and behind it, but I would like to continue to see oversight, not just by those groups but also by the committee.

    Mr. BERMAN. Mr. Roberts—I have talked to Mr. Daniels about making certain commitments. Will ICANN commit that you will enforce the terms of the accreditation agreements as to the requirements that are contained in it? And before moving forward with the registration process a dispute resolution process will be adopted and made incumbent upon all registrars?

    Mr. ROBERTS. You have asked me a multi-part question, sir. Let me answer the first part of it.

    The registrars, the newly competitive registrars, and we hope to see Network Solutions join that group soon, are contractually bound to us for observance of those guidelines, and they risk their accreditation if they find themselves in breach of those agreements. So we certainly believe that, with respect to the first part of your question, the answer is yes.

    Would you repeat the second part?

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    Mr. BERMAN. Yes. Before much longer, you will require that each company adopt a dispute resolution process.

    Mr. ROBERTS. Yes. We are a consensus-based organization. We don't have statutory authority. We do have the ability to reflect the consensus that is reached by the community in contractual documents, which we have done. The accreditation guideline contract that has already been used—already been signed by over 50 companies contains a provision that if ICANN, through its open public consensus process, adopts an ADR, it will be binding on those registrars.

    Mr. BERMAN. Which, by the way, then this issue of not having anyone from the intellectual property community on the ICANN board does have some meaning.

    Mr. ROBERTS. Mr. Berman——

    Mr. BERMAN. What was the registration fee? $70 I heard reference to earlier for a domain name, is that right?

    Mr. DANIELS. Sir, the original agreement, Mr. Berman, that we negotiated with the National Science Foundation some years ago was $70 for 2 years. So when somebody comes in to our site and registers a domain name, 2 years, $70, with an annual renewal of $35.

    Mr. BERMAN. Some people might think that that was the consideration you got for agreeing to put together a list of domain names. It wasn't some sort of nebulous perhaps intellectual property, perhaps not right in the future to exploit something, but that $70 from I guess 5 million domain name users, and some of them renewed, that that was what you were getting for what you were doing.
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    That is more a comment. I don't want to get——

    Mr. SBARBARO. It didn't exist—the answer to that, Congressman, is it didn't exist in the beginning of the cooperative agreement. It was contemplated, but there was no number. That is where the $3,522,000 from the National Science Foundation came from. That is how Network Solutions started.

    Mr. BERMAN. My time is up.

    Mr. COBLE. I thank the gentleman.

    The gentleman from Virginia, Mr. Goodlatte.

    Mr. GOODLATTE. Thank you, Mr. Chairman.

    Mr. Gurry, can you tell us what kind of recommendations the World Intellectual Property Organization made to ICANN with regard to dealing with the problem of ending bad-faith cybersquatting?

    Mr. GURRY. Yes, sir. The essential recommendations were that a uniform dispute-resolution policy ought to be adopted, that the scope of that policy ought to be complaints concerning the deliberate, bad-faith abusive registration and use of domain names in violation of intellectual property rights. We limited it to that class of disputes and not all forms of intellectual property disputes, and we limited it to violations of trademark rights.
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    That is the principal mechanism that our report envisioned could be used for the elimination of cybersquatting.

    I mentioned also, sir, earlier, that we did envisage an enforcement mechanism for ensuring that content details are reliable and accurate, a take-down mechanism, somewhat similar to the DCMA mechanism.

    Thirdly, sir, there is the question of famous marks, where we recommended that an exclusion mechanism ought to be adopted whereby, upon an adjudication of an application, an exclusion could be granted for any mark which was famous across a widespread geographical area, because we are dealing with generic top-level domains rather than domains confined to a territory, and across various classes of goods.

    That last set of recommendations has been referred by the ICANN board to the DNSO, but to report back after the August meeting of the ICANN board. Its principal significance lies in respect of any possible new gTLDs that might be introduced.

    Mr. GOODLATTE. Thank you.

    Mr. Roberts, many people, including some of us on this subcommittee, are concerned about ICANN's lack of action in adopting WIPO recommendations on contact details and dispute resolution. How do you respond to that?

    Mr. ROBERTS. Congressman, I believe there is a misunderstanding with regard to that. We indeed have adopted them in our accreditation guidelines, and they very closely mirror the WIPO recommendations, and they are—with respect to my last answer, they are now contractually binding on all of the 57 companies that have signed our accreditation agreements.
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    Mr. GOODLATTE. Ms. Chasser, I wonder if you could comment on this. Do you think what the World Intellectual Property Organization has recommended is sufficient to deal with bad-faith cybersquatting?

    Ms. CHASSER. We support the WIPO recommendations, yes.

    Mr. GOODLATTE. You do.

    Ms. Karg?

    Ms. KARG. We support the recommendations as well.

    And I would like to add on to note that, obviously, enforcement of the mechanisms is equally important to the adoption of them. When it comes to verifying the data on there, things like prepayment goes a long way toward verifying that data is accurate.

    Mr. GOODLATTE. Thank you.

    Thank you, Mr. Chairman.

    Mr. COBLE. I thank the gentleman.

    The gentlelady from California, Ms. Lofgren.

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    Ms. LOFGREN. Thank you, Mr. Chairman. I think this has been a very useful and enlightening hearing in many respects; and, clearly, although we have touched on many topics, this will not be the last time we touch on the general topic in this committee or in this Congress.

    But, thinking ahead, I think I said earlier that what we do now will have a huge impact on the growth of the Internet; and, had we known in the early 1990's that the Internet was going to explode and develop in the way it has, we probably would have done some things a little bit differently.

    I don't want to make mistakes for the future, so Mr. Gurry and Mr. Roberts, assuming that the issue of the database ownership is successfully resolved for the public, and I think the only intellectual property right not mentioned by my colleague, Mr. Delahunt, was trade secrets, and assuming that issue is successfully resolved, Mr. Roberts, how would you envision updating and managing of this information, given the multiplicity of registrars?

    Mr. ROBERTS. Well, thank you for that question. That is a very good question. It is very definitely on the table with respect to the expansion of top-level domain name space, and our experience over the past 4 or 5 years gives us the opportunity as a community to say what things have transpired are we happy with and what things need to be changed.

    I think with very particular respect to the issue of specification, there is a long tradition in the Internet community that a specification such as the interface between registry and registrars and the exchange of data and so on ought to be open interface, it ought to be in the public domain, it ought to be subject to proprietary implementation on both sides of the specification to encourage the kind of innovation and entrepreneurship that is essential to this environment. But in order to have a correct, proper, forward-looking, level playing field here, we simply have to get these basic specifications in the public domain.
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    Ms. LOFGREN. You would do that by contract with each registrar?

    Mr. ROBERTS. We believe as ICANN goes forward in time and moves out of the transition period into its fully elected operational environment, that it will—it is already contemplated by the White Paper and by agreement with the government that it will have agreements with registries and registrars that embody these public interest principals.

    Ms. LOFGREN. Mr. Gurry, the international community is seemingly joining our approach on notice takedown as an essential element. Would you concur with Mr. Roberts' statement, since that is an essential element for the protection of intellectual property?

    Mr. GURRY. We believe that the notice and takedown is an essential element for the protection of intellectual property. With a high-volume, automated operation like the registration of domain names, it is impossible, without constraining those operations, to ask for registrars to physically verify data. The best approach we believe is to place that burden on the market, where the market can police it.

    Ms. LOFGREN. Finally, I have a question I am not sure can be answered today, but I think it is inherent in all of the questions we have asked here, all of us, from whatever—which is, how do we interface the policymaking that is embodied and evidenced here in the U.S. Congress with the policy decisions that are going to be made in WIPO and ICANN, thinking about ADR, for one example? We all agree there ought to be a uniform ADR process that works. But the details of that are very important and can yield radically different results, depending on what is within them.
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    There was a meeting yesterday, consensus is apparently being reached, and I am not suggesting we should choose a different mode of action, but how do we integrate our ideas? For example, where is venue? Is it where the injured party is? Where the scammer is?

    Issues such as that will be determinative of the outcome, and how do we solve that question, Mr. Roberts or Mr. Gurry, in your judgment?

    Mr. GURRY. Yes, madam, thank you. It is an exceptionally important question, and it is one of the reasons why we approached in the report the dispute resolution mechanism as a minimalist model, to reflect simply that which is already agreed. There was not one voice expressed in favor of cybersquatting in all of our process.

    There are many, as you point out, extremely important details. We believe that the only choice we have in trying to get uniformity is to consult as widely as possible. And for this purpose we have an interactive web site constantly available, and we consult as much and as frequently as possible with governments.

    Ms. LOFGREN. If I may—I don't want to be rude, but my light just went on——

    Mr. COBLE. Without objection.

    Ms. LOFGREN. If I could ask one follow-up question—I certainly agree with what you have done to date. When you are reaching consensus, it is the common denominator that allows you to move forward. But thinking ahead a couple of waves out off the shore, the consensus allows for differences and, ultimately, the differences that allow those who wish to be unconstrained in bad doing will emerge, and it is that that must concern us and how are we going to proactively deal with that with adequate policy input, not only from the United States but from other elements of governmental units around the world.
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    Mr. GURRY. Yes.

    If I may add a further complication, the difficulty is that the traditional means of a treaty is, for the Internet, this rather inappropriate, because one has to get all of the countries of the world to sign onto a treaty, and this is not going to happen. So the best mechanism, we believe, is a consultative mechanism of member States and a steering committee for the intellectual property questions that are arising out of the digital economy, more generally, and electronic commerce.

    Mr. ROBERTS. Yes, I would just add very briefly to that that the board is very much aware that it operates in a fishbowl; and, furthermore, we are on untrodden territory with respect to working out a lot of questions that historically have been solved by statutory means in a consensus manner.

    The government spent a year and a half through the Green Paper and White Paper process coming to the conclusion it was worth a try, and I think the record of the past 6 or 8 months validates that so far it is looks like a good process and it is beginning to work. There is a lot of work still to do, but I certainly personally have confidence that we can pursue this. In the same sense that Mr. Daniels and Mr. Rudd have testified in the last week or so they have an obligation to their investors, the directors of ICANN are bound, legally and fiduciarily, to the principles on which the corporation was founded which are derived from that policy process.

    So I assure you there isn't a moment that goes by that we don't have reference to the basis on which we were formed.
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    Ms. LOFGREN. Thank you, Mr. Chairman.

    Mr. COBLE. The gentleman from Utah, Mr. Cannon.

    Mr. CANNON. Thank you, Mr. Chairman.

    Mr. Roberts, what kind of oversight will Congress have of ICANN?

    Mr. ROBERTS. Congressman, the consensus process that we use in these various areas we are chartered to be active in by our memorandum of understanding with the government leads to non-statutory solutions. In other words, they are arrived at by a willingness of all the parties to agree among each other, frequently by contract, but not necessarily by contract. If those outcomes are found wanting within legislative forums, then those forums will take appropriate action. I am certain that this hearing today is evidence of that.

    Mr. CANNON. Your contract is with the Commerce Department?

    Mr. ROBERTS. We operate under a 2-year memorandum of understanding with the Department of Commerce, yes, sir.

    Mr. CANNON. Is that within NSF or with the Department of Commerce?

    Mr. ROBERTS. It is with the Department of Commerce, which assumed the lead agency status on this about a year ago.
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    Mr. CANNON. Our oversight would be then as oversight through the Commerce Department and the operation of the memorandum of understanding with you?

    Mr. ROBERTS. That is a very direct tie to our activities, yes, sir.

    Mr. CANNON. Are you entering into agreements with other governments or departments of governments around the world?

    Mr. ROBERTS. The White Paper's assumption was that, following this 24-month transition, there wouldn't be a direct tie to us by any government, including the United States Government. Now, that is obviously an assumption that is subject to review and oversight.

    Mr. CANNON. So you anticipate a point at which you would operate this system independent even of the Commerce Department?

    Mr. ROBERTS. That is the intent of the process which produced our bylaws and our articles of incorporation, yes, sir.

    Mr. CANNON. Thank you.

    Generally speaking, I would like to ask questions at these hearings, but I do feel like I need to respond to a couple of comments. I personally don't give a fig about NSI, I don't have any interest there, certainly no stock or anything like that. But I do care about the rule of law and the development of policy, and this is a very critical time in the context of the development of policy. In an older world, Congress was a place where we developed a consensus in America, but in the age of E-commerce, things move more quickly, I recognize.
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    I do believe that there are a number of areas of concern. Let me say the first area of concern, to disagree with my good friend, Mr. Delahunt, in suggesting that what happened with NSI was the creation of a monopoly, that the U.S. didn't get a good deal. Just frankly, the rights conferred through an agreement were to develop a whole new area, and now we have that area developed, and it seems to me that it is not good policy to make decisions based upon press releases and press reports when the issues are more fundamental.

    Frankly, I will state that I am deeply disturbed by the testimony we had from the Department of Commerce which I can only say, from this point on, we are going to investigate this more, but my perception of the reluctance by Mr. Pincus and Ms. Burr to accept responsibility for the burst of obscenity in domain names gives me great concern about how this process should go forward and should work.

    Now, in that context, let me ask either Mr. Daniels or Mr. Sbarbaro, what percentage of the activity—this is a vague question, and it will give you some latitude. What percentage of activity on the Internet is American? What percentage is in English? What percentage of the intellectual property development is coming from America? How much is coming from the rest of the world?

    Mr. DANIELS. That would be impossible to give an exact number, but I would speculate 75 percent U.S. And 25 percent overseas, based on domain names. That is about what our registrations are running. It used to be, a year ago, approximately 90 percent U.S. Registrations. It is starting to shift to international.

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    Mr. CANNON. Of course, registrations don't really express the kind of development of software or other considerations. I recognize that. But there are some numbers out there, stunning when you look at them, and of course these numbers are fluid. But the largest proportion of computers per capita are in America.

    Japan has about a quarter of what we have per capita. Of course, we have three times as many people as Japan almost now.

    England is second and is still well under half or about half of what we are per capita.

    It seems to me that the whole—it is not just the Internet, but the whole of the technological revolution going on in the world is being led by America. Are we jeopardizing that when we create a group like ICANN, Mr. Daniels?

    Mr. DANIELS. Well, I continue to have very major concerns about exactly that issue, Congressman, because it is unclear to me, continuing to listen to this dialogue now that I have listened to for several years about who is going to control any of this or who is going to make decisions. I am constantly hearing we are going to decide that, a new board is going to think about it, we are going to go from an Interim Board to a full board, and I am concerned about that.

    And may I have the liberty of making another comment on something you just said about debating these issues that should be done in a very rational framework inside a reasonable body, which is where I come down on all of these issues that are very tough issues. This should not be played out in the press, as it has been. For instance, if I may quote, and I will be glad to submit a copy to this committee, from the Associated Press of July 16th about your question about the censorship and obscenity.
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    ''ICANN is not in the censorship business, President Michael Roberts said, but the group's lawyer accused Network Solutions of inciting trouble over losing its lucrative contract as exclusive company registering addresses. A cynical person might say they saw this as another opportunity to portray this as complicated and messy if open to competition, lawyer Joe Simms said.''

    I can give the committee 50 examples of where something is done—the Department of Commerce in this case directed us not to have anything to do with competitive registrars allowing the dirty words on the Internet, and the next day or two we get in the press comments from these organizations that we have done something at Network Solutions to impede competition.

    I have a stack like that this high. This is just unconscionable behavior.

    Mr. COBLE. The gentleman's time has expired.

    The gentleman from Massachusetts, Mr. Delahunt.

    Mr. DELAHUNT. Thank you.

    I have to respond to my friend from Utah. I don't think we really have an advertised agreement.

    I wish that I had some stock in NSI, Mr. Daniels. You seem to have done very well, and that is good, in our system.
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    What I was suggesting is, from the perspective of the government—because what I hear here is a conflict in terms of an interpretation of language in a cooperative agreement. The next thing is we will have the Department of Justice sitting at the table making an inquiry as to whence we go from here if there is no resolution in terms of moving it into litigation, and I don't think that serves the best interests of the American people.

    What is the capitalization, by the way, of NSI?

    Mr. DANIELS. The market capitalization?

    Mr. DELAHUNT. Yes.

    Mr. DANIELS. It tends to fluctuate between now about $2 billion and about $4 billion.

    Mr. DELAHUNT. Two to four billion. That is a pretty good range.

    How much have you grown that, by the way, Mr. Daniels? You say you acquired the NSI in 1995?

    Mr. DANIELS. Yes, when I acquired the company on behalf of Science Applications International Corporation——

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    Mr. DELAHUNT. What was the fair market value at that point in time?

    Mr. DANIELS. It was a privately held company that had lost money continually; and for the first 2 years after we bought the company, we invested tens of millions. It lost about $2 million the first year. The second year, it lost about $2.5 million. The third year, we began making money out of the company.

    Mr. DELAHUNT. Again, my congratulations.

    Mr. DANIELS. May I please comment?

    You just mentioned the Department of Justice. We have been investigated since 1977 by the Department of Justice, I am sorry, 1997——

    Mr. DELAHUNT. I am not asking—you know, I am not asking whether you were investigated. I was unaware of an investigation. Believe me, I am not even referring to any investigation that may or may not have been done. I am just making the observation, based on what I am hearing here today, and I am glad to hear there are ongoing discussions and negotiations, that what will occur is presumably, at some point in time, some litigation in which the United States government would be represented by the Department of Justice to resolve some of the issues that are obvious here today.

    But you and I have had quite a colloquy here. I would like to give anyone else who wants an opportunity to comment upon my exchange with both Mr. Sbarbaro and Mr. Daniels relative to this idea of ownership of a property right. I really wish Mr. Kirk was here and Mr. Cohen, but I don't know. Ms. Chasser, would you be interested in responding?
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    If no one has comment, I will just yield back balance of my time.

    Ms. CHASSER. I don't have a comment.

    Mr. DELAHUNT. No comment.

    I yield back the balance of my time.

    Mr. COBLE. I would say to my friend from Massachusetts, we can corral Mr. Cohen and Mr. Kirk for a response at a later time if you so desire.

    Folks, this has been a very illuminating hearing, albeit a long hearing. I apologize for that, but this is a volatile and complex issue. We will be talking to you all more. I want to latch two things down before we adjourn.

    Mr. Roberts, it is my understanding that your accreditation agreements include a clause that will incorporate a dispute resolution proposal once it is adopted by ICANN.

    Mr. ROBERTS. That is correct.

    Mr. COBLE. Now, it was my understanding that you all have not yet adopted such a proposal, and I thought I understood you to say earlier that you have. What is correct?

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    Mr. ROBERTS. We expect a proposal on dispute resolution to come to us for our board meeting in 3 weeks from the Names Council of the DNSO. They have a draft that they are considering.

    Mr. COBLE. That is prospective. That is in the works then.

    Mr. ROBERTS. Yes, sir.

    Mr. COBLE. Mr. Gurry, I was the only one who had questioned you until the gentleman from the Roanoke Valley and the gentlelady from California put questions to you. Since you have traveled the greatest distance and since you are the official WIPO representative at the table, can you tell us in 75 or 100 words or less what you have gleaned from today and where we can go from here?

    Mr. GURRY. Well, thank you very much, sir, for the opportunity.

    I have learned a great deal myself. I think the question that Representative Lofgren raised is one that perplexes us a great deal: that is the whole question of how one formulates policy for an international medium that concerns the whole world, when the world has historically been divided into physical territorial units with the separate attributes of sovereignty. We don't have any answer to that.

    We undertook a process that we considered we were privileged to have the opportunity to do. It involved the public sector and the private sector and every possible interest group. But we recognize, after it, there are no objective mechanisms in that process for distinguishing between the weight to attach to the opinion of an individual, for example, on the one hand, and to that of the United States Government, on the other hand. This is not something that we feel can continue in the future. There have to be mechanisms for evaluating the weight to attach to opinions of public participants and private participants.
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    Thank you, sir.

    Mr. COBLE. Well, we of the subcommittee are appreciative to each of you, including Mr. Cohen and Mr. Kirk, who had to depart, for your contribution today. As I said to Mr. Pincus, I am sure we will continue to be in touch with one another.

    This concludes the oversight hearing on Internet Domain Names and Intellectual Property Rights. The record will remain open for 1 week.

    Thank you for your cooperation and the subcommittee stands adjourned.

    [Whereupon, at 1:35 p.m., the subcommittee was adjourned.]

A P P E N D I X

Material Submitted for the Hearing Record


General Counsel of the
United States Department of Commerce,
Washington, DC, July 28, 1999.
Hon. HOWARD COBLE, Chairman,
Subcommittee on Courts and Intellectual Property,
Committee on the Judiciary,
House of Representatives, Washington, DC.
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    DEAR CHAIRMAN COBLE: I am writing to provide additional information with respect to two issues that arose during today's hearing before the Subcommittee on Courts and Intellectual Property.

    First, with respect to the question regarding the Y2K readiness of the root server system. ICANN has established a root server system advisory committee (RSSAC), which includes all 13 zone file managers. The advisory committee's mandate is to examine the security of the root server system, a task outlined in the MOU between the Department of Commerce and ICANN. ICANN is currently reviewing the operations and procedures, and associated hardware and software, of root server system for potential Y2K concerns. An updated report by the RSSAC is expected to be presented at the ICANN Board meeting next month. The Department of Commerce is carefully monitoring the work of the RSSAC in this area.

    Second, I would like to provide some additional information regarding the ability of Network Solution, Inc. (NSI) to maintain in force its policy regarding domain names containing particular obscene or derogatory words. I want to reiterate that the Commerce Department has not taken any action that would prevent NSI from maintaining its policy in force.

    No one at the Department of Commerce who participated in the negotiations with NSI that led to Amendment 11 to the Cooperative Agreement and to the Department's approval of the Registrar License and Agreement recalls any discussion regarding the effect of those agreements on NSI's ability to maintain its policy in effect. A number of discussions did take place regarding ongoing litigation in this area, but we do not recall any discussions during the negotiations regarding the effect of these agreements on NSI's ability to maintain its policy.
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    The comments made on behalf of NSI indicate that NSI believes that Section 2.14 of the Registrar License and Agreement prevents NSI from adhering to its policy with respect to registrations submitted by other registrars for inclusion in the registry. That agreement, however, governs only the responsibilities of NSI and the signatory registrars with respect to the Shared Registration System. (For example, Section 2.1 simply obligates NSI to operate that System.) Moreover, the plain language of Section 2.14 requires registrars to abide by certain NSI policies, but does not preclude NSI from creating and maintaining screens that prohibit the registration of certain names.

    NSI's operation of the registry is governed by the Cooperative Agreement. It is Amendment 11 to the Cooperative Agreement—not the Registrar License and Agreement—that establishes the standard for pricing of registry services, bars NSI from using the revenues and assets of the registry to advantage its registrar activities, and requires NSI to provide equal access to competing registrars. Nothing in Amendment 11 bars NSI from continuing its preexisting policy regarding obscene or derogatory words. Of course, Amendment 11 would—through its equal access requirement—require NSI to apply any such screen to all registrars.

    With respect to the letter, dated April 30, 1999, from Michael Daniels of NSI to Becky Burr, Acting Administrator, Office of International Affairs, National Telecommunications and Information Administration, purporting to memorialize a conversation between Mr. Daniels and Ms. Burr, Ms. Burr does recall a telephone conversation with Mr. Daniels and Mr. Sbarbaro on or around April 30, 1999—ten days after the Department's approval of the Registrar License and Agreement—regarding a position NSI was contemplating taking with respect to ongoing litigation concerning its screening policy. She does not recall telling Mr. Daniels that Section 2.14 prohibited NSI from continuing its policy at the registry level and, if she did, she was incorrect.
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    I hope this information is useful to the Subcommittee, and we look forward to continuing dialogue with you regarding the domain name system management transition process.

Sincerely,

Andrew J. Pincus.

cc.

The Honorable Howard L. Berman
Ranking Member

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TESTIMONY OF SENATOR ROBERT G. TORRICELLI

JUDICIARY SUBCOMMITTEE ON INTELLECTUAL PROPERTY

JULY 1, 1999

    I would first like to express my appreciation to Chairman Coble and Ranking member Berman for holding this hearing today. My home state of New Jersey is fortunate to be the home of the brand name and generic pharmaceutical industry. Together they employ over 60,000 workers and pay $200 million in state and local taxes.

    Adequate patent protection is the basis of the pharmaceutical industry. It provides the incentive for the Research and Development that is responsible for wonderous new drugs like those that are lowering and changing the face of health care. But patent law also provides the framework necessary for the development of market competition and cost reduction for consumers. Effective patent law must strike a balance between rewarding R&D and promoting competition.

    That is why today's hearing is so important. Traditionally, patent extensions have appeared in the dead of night, in end of the year, must-pass legislation with little or no oversight or debate. With the effort of this committee, Congress is rejecting that approach. We are saying that while there are differences of opinion on patent extension, it is an issue that should be decided in the open and with input from all concerned parties.

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    The Hatch-Waxman Act of 1984 was a compromise which granted drugs that entered the regulatory review ''pipeline'' after its enactment a maximum patent extension of five years. For the 123 drugs already in the review ''pipeline'' at the time of enactment, the Act granted two years of patent protection. While the average review time for these 123 drugs was slightly over two years, 17 drugs had review times twice as long. Seven of those patents are still in effect today.

    Today's hearing on HR 1598, authored by Reps. Ed Bryant & Jim McDermott, and S 1172 which I introduced, addresses the future patent life of those 7 drugs. Each bill establishes a non-political process by which interested parties can present their case to the Commissioner of the Patent & Trademark Office. The Commissioner, if he or she believes the evidence warrants, can grant a patent extension for up to three additional years. This decision is reviewable to the Circuit Court by either party.

    However, there are significant differences within the process of each bill that I would like to outline to the Committee. First, under S 1172, the party seeking the extension bears the burden of proving they showed due diligence during the regulatory review process. In contrast, HR 1598 has a rebuttable presumption that the extension should be granted. The party opposing the extension must prove it is undeserved.

    Second, under S 1172, the PTO Commissioner must consider public interest factors and, prior to granting an extension, decide whether an extension would be detrimental to the public interest or interests of fairness. HR 1598 contains no similar public interest requirements.

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    Third, S 1172 provides a mandatory consultation role for the FDA. Possible delay by the FDA is at the heart of the issue and it is appropriate that they be consulted prior to a decision. HR 1598 makes FDA records available but has no consultation role.

    Finally, S 1172 recognizes the significance of generic drugs and contains provisions to encourage market competition within the drug industry. The first provision is a limited revision of the ''Orange Book Certification''. S 1172 would allow generic companies to certify only to the active ingredient of the patent product. This would simplify the current requirement of certifying to patents for specific formulations or for methods of use, as well as to active ingredients. Because this is a new idea, it applies only to the 7 pipeline drugs in the bill

    The second provision addresses the recent Circuit Court decision in Mova Pharm. Corp. v. Shalala regarding when Generic Drug exclusivity is established. S 1172 would restore the original Congressional intent by providing that generic drug exclusivity is established upon the filing of a generic drug application and subsequent suit for infringement. The Court decision, by allowing exclusivity to be established solely by filing an application, will result in a reward without the benefit of testing the patent in court.

    Mr. Chairman, the issue of patent extensions in Congress has been controversial. But for my state, and both sides in this debate call New Jersey home, it is extremely important. The bill I have introduced represents compromises developed over two years of discussions with the leading companies in my State. This issue is difficult and contentious and I appreciate your efforts to it forward. The road to passage is difficult but is worth pursuing. I look forward to working with you and the Committee in support of this effort.
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General Counsel of the,
United States Department of Commerce,
Washington, DC, July 29, 1999.
Mr. JAMES RUTT, Chief Executive Officer,
Network Solutions, Inc.,
Herndon, VA.

    DEAR MR. RUSS: I am writing to eliminate any misconceptions you may have regarding the Commerce Department's position concerning Network Solutions, Inc.'s (NSI) ability to maintain in force its policy regarding domain names containing particular obscene or derogatory words. As discussed in detail in the enclosed letter to Chairman Coble, we do not believe that anything in the Registrar License and Agreement or in the Cooperative Agreement, as amended, prevents Network Solutions, Inc. from maintaining this policy.

    Because we believe this issue is such an important one, we want to make clear that, in our view, the decision whether to have a screening policy in place with respect to words which NSI deems obscene or derogatory rests entirely with NSI.

Sincerely,


Andrew J. Pincus.

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Enclosure

     


The Internet Corporation for Assigned
Names and Numbers (ICANN),
Marina del Rey, CA, August 4, 1999.
Hon. HOWARD L. BERMAN, Ranking Member,
Subcommittee on Courts and Intellectual Property,
Committee on the Judiciary,
House of Representatives, Washington, DC.

    DEAR CONGRESSMAN BERMAN: This is in response to your letter of July 29, 1999, in which you ask what ICANN mechanisms exist to deal with complaints of the public about the activities of ICANN-accredited registrars.

    As you know, ICANN's role is to serve as a consensus-development entity with respect to the management of certain (mostly technical) aspects of the Internet Domain Name System (''DNS''). Because it is a private sector consensus body, ICANN derives its ''authority'' from contracts with participants in the DNS, and the scope of its activities is limited by its Articles of Incorporation and Bylaws, copies of which are available at www.icann.org. In general, these confine ICANN to adopting and implementing consensus policies with respect to a very narrow set of responsibilities.

    One of the areas in which ICANN has some responsibilities is the promotion of competition in the registration of domain names. Under its November 25, 1998, Memorandum. of Understanding with the Department of Commerce, ICANN agreed to undertake the job of determining whether entities seeking to become competitive registrars in the .com, .net and .org domains, previously served only by Network Solutions, meet minimum qualifications to offer such services. These qualifications were established through extensive discussion within the Internet community, including posting for comment of detailed proposals for an accreditation program, solicitation of input from the community on 51 specific issues concerning the requirements appropriate for accreditation, receipt and consideration of over 50 written comments received from interested companies and individuals, and oral comments by members of the community at a public forum held during the ICANN quarterly meeting in early March 1999.
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    The outcome of this process is an accreditation policy that seeks to encourage robust competition among registrars by keeping entry barriers low while enhancing the Internet's stability through such measures as data escrow to ensure that registered domain names are preserved in the event an accredited registrar goes out of business. (The policy is available at www.icann.org/policy_statement.html.) In general, the requirements for accreditation include a demonstration of basic minimum technical and financial capabilities (including general liability insurance), the absence of past criminal or fraudulent conduct, and agreement to abide by policies adopted through the ICANN consensus process covering specified subjects, including domain-name/trademark dispute resolution and the public availability of contact information through WHOIS services. ICANN has already announced the accreditation of 57 organizations to begin offering name registration services in the .com, .net and .org domains as soon as the test process now underway is completed, and several new applications are being received each week. The names of those 57 entities can be found at www.icann.org.

    Since its inception, ICANN has maintained an e-mailbox. for comments from the public on general topics at comments@icann.org, and any complaints about ICANN-accredited registrars may be sent to this address. Complaints not intended for public posting may be sent directly to me at roberts@icann.org. Since the beginning of the test process on April 26, ICANN has received a few complaints, either through the comment mailbox or by direct contact, about accredited registrars (as well as a larger number about NSI). Any complaints received are reviewed by ICANN staff to determine whether they raise a question of compliance with the affected registrar's accreditation agreement. If they do, the matter is promptly raised with the affected registrar to achieve voluntary compliance if possible. In most cases, however, complaints involve specific consumer disputes not implicating any registrar's accreditation agreement.
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    While ICANN has been serving in an informal way to forward the complaints in these cases to the appropriate registrar, it has neither the resources nor the charter to serve as a consumer complaint agency for the DNS. The registrars are, of course, businesses subject to the processes of voluntary self-regulatory bodies (such as the Better Business Bureau), and are also subject to civil claims in court and, in sufficiently widespread or serious cases, to governmental enforcement of consumer-protection laws. For ICANN to attempt to undertake to process and resolve consumer complaints would obviously require a significant change in both its mission and its resources, and would be incompatible with the narrow reason for its existence: to provide the vehicle for private sector management of a limited number of technical and policy aspects of the DNS.

    I hope this is responsive to your inquiry. Please let me know if I can provide any further information.

Sincerely,


Michael M. Roberts,
Interim President and Chief Executive Officer.

cc:

The Honorable Howard Coble
Chairman, Subcommittee on Courts
and Intellectual Property
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August 4, 1999.
Hon. HOWARD COBLE, Chairman,
Subcommittee on Courts and Intellectual Property,
Committee on the Judiciary,
House of Representatives, Washington, DC.

re: Oversight Hearing on Internet Domain Names and Intellectual Property Rights, July 28, 1999

    DEAR MR. CHAIRMAN: On behalf of the American Society of Composers, Authors and Publishers (''ASCAP'') and Broadcast Music Incorporated (''BMI''), we write to express our thanks and appreciation to you and the members of your Subcommittee for holding the above referenced hearing last week. In response to your invitation for interested parties to supplement the record, we submit this letter to highlight certain of the unique concerns faced by the two largest performing rights organizations in the U.S., which together represent almost all of the songwriters, lyricists and music publishers in the U.S. and, through affiliation agreements with foreign performing rights organizations, the interests of those organizations' members here in the U.S.

1) The Need for Public Access to Accurate WHOIS Data

    On behalf of our members and affiliates, ASCAP and BMI seek to license the public performance of copyrighted musical compositions transmitted over the Internet. In order to make offers to license, we have relied on free, public access to the WHOIS database maintained by Network Solutions, Inc. (''NSI''). Obviously, inaccurate contact information impedes the process of contacting the correct party with whom we wish to negotiate a license. Indeed, neither our members and affiliates, nor our organizations on their behalf, can seek redress through our courts for infringement claims without accurate contact information. While the provision of ISP information is useful, if we were to avail ourselves of a ''notice and takedown'' remedy under the Digital Millenium Copyright Act (''DMCA''), ISP information alone is insufficient to seek redress in the event an infringement action were to be initiated. However, as stated, our first priority is to license sites and for that we need accurate contact information.
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2) The Need for a Unified WHOIS Database, Searchable Across All Registrars

    ASCAP and BMI are concerned that there is at present no WHOIS database that is searchable across all registrars. Copyright owners should not be expected to search separately the WHOIS databases of the 57 presently accredited registrars that will be coming on-line in the next few months along with the unforetold numbers of others in the coming years. As the number of registrars grow, the task of seeking out the proper contact information or ISP information should not become a search for a needle in a haystack. The Department of Commerce claims that it is supportive of measures that permit private enforcement of intellectual property rights. However, the Internet Corporation for Assigned Names and Numbers (''ICANN'') has not yet indicated what administrative mechanisms it will use to support and enforce public access to a unified WHOIS database that is searchable across all registrars.

3) The Need for ICANN to Enforce Accurate Information Policies for WHOIS

    As noted, ASCAP and BMI need accurate contact information. We are concerned that the generic Top Level Domain (''gTLD'') registrars have not proposed any affirmative plan addressing how they will act on complaints by third parties, such as our organizations, when we discover that registrars are accepting or tolerating false information by registrants; nor has ICANN required them to do so or instituted any system for enforcing such a requirement. ICANN must be pressed to do so.

4) The Need for an Intellectual Property Voice on ICANN's Board

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    The Subcommittee on Courts and Intellectual Property should know that ASCAP and BMI have been diligently attempting ''to work within the process.'' Our organizations were both founding members of the group that was recognized at ICANN's meeting in Berlin as the Intellectual Property Constituency (''IPC'') to the Domain Name Supporting Organization. We have also undertaken the initiative to join with other representatives of copyright holders to form the Copyright Coalition on Domain Names. Representatives from both organizations testified before your Subcommittee last week. Yet, we continue to have grave fears that copyright owner interests will not be given a voice on ICANN's Board. From the early stages of negotiating the transfer from NSI to ICANN, copyright interests have not been included in the inner circle. It is imperative that copyright interests be included now. The copyrighted property of our members and affiliates is carried on the Web. We should at least be given access to the type of information that would permit us to enforce and protect the rights of our members and affiliates.

    The issue of how to protect U.S. intellectual property rights on the Internet during this time of transition is critically important, in our view, to the continued vitality and health of the American economy in the next millenium as we shift ever more towards an economy based on intellectual property. We sincerely hope that your Subcommittee will continue to exercise its oversight jurisdiction, vigorously and steadfastly, in the coming months.

Respectfully submitted,

Joan M. McGivern, Esq.
Assistant Vice President,
Legal Affairs, Office of the CEO,
ASCAP


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Marvin L. Berenson, Esq.
Senior Vice President &
General Counsel,
BMI.

cc:

Subcommittee Members on Courts and Intellectual Property,
Committee on the Judiciary,
U.S. House of Representatives

I. Fred Koenigsberg, Esq., White & Case, LLP,
Counsel to ASCAP

Michael J. Remington, Esq., Drinker, Biddle & Reath, LLP,
Counsel to BMI

     

    The report of the WIPO Internet Domain Name Process, The Management of Internet Names and Addresses: Intellectual Property Issues, referred to in Mr. Francis Gurry's prepared statement, is held in the subcommittee's files.











(Footnote 1 return)
National Telecommunications Information Agency, Department of Commerce, Statement of Policy on the Management of Internet Names and Addresses.


(Footnote 2 return)
The full text of the recommendation adopted by the GAC is available at http://www.icann.org/gac-comm-25 may99.html.


(Footnote 3 return)
The text of the resolution is available at http://www.icann.org/berlin/berlin-resolutions.html#2.


(Footnote 4 return)
American Heritage Dictionary p. 943 (3d ed. 1996)


(Footnote 5 return)
American Civil Liberties Union v. Reno, 929 F. Supp. 824, 830 (E.D. Pa. 1996), aff'd, 117 S.Ct. 2329, 1997 U.S. LEXIS 4037, at *12 (1997) (hereinafter ''ACLU'').


(Footnote 6 return)
A domain name is created and requested by an applicant who then becomes a ''registrant.'' ''Holder'' rather than ''owner'' more clearly describes the relationship between a registrant and the recorded domain name. A registrant does not ''own'' a domain name any more than he or she owns a telephone number.


(Footnote 7 return)
Network Solutions won the right to develop the domain name registration system by competitively bidding for a cooperative agreement with the National Science Foundation, an agency of the federal government. Currently, the Cooperative Agreement is overseen by the Department of Commerce. Network Solutions is in discussions with the Department of Commerce about transitioning certain functions it performs under the Cooperative Agreement to private sector management. We fully support the concept of private sector management and competition and are doing all we can to bring new competitors on at a pace that does not threaten the stability and reliability of the Internet.


(Footnote 8 return)
The other four (.int, .edu, .gov and .mil) are restricted, in the sense that only certain entities meeting certain criteria may register second level domain names in them.


(Footnote 9 return)
When Network Solutions receives a file-stamped copy of a Complaint, it prepares a gold-seal declaration of the custodian in control of domain name registration and it has come to be known as a ''registrar certificate.'' Registrar certificates have been accepted in every court to date, including the High Court of Justice, Chancery Division, in England, Canadian Federal Court, the High Court of Hong Kong, the High Court in Singapore, Magistrate's Court of Israel, and twenty federal courts around the United States, including the Commonwealth of Virginia. Only one federal court judge in New Hampshire has declined to accept a registrar certificate.


(Footnote 10 return)
American Commercial Inc. d/b/a Mikasa and Mikasa Licensing, Inc. v. Sports and Leisure International d/b/a Mikasa Sports, Civil Action No. 96–713LHM (U.S.D.C. C.D. Cal.); Mattel, Inc. et al v. Hasbro, Inc. et al., Civil Action No. 96–7635, (U.S.D.C. C.D. Cal.).


(Footnote 11 return)
A trademark from the trademark registry of any country will suffice for purposes of the Policy, not just the U.S. Patent and Trademark Office.


(Footnote 12 return)
As may be clear from this discussion, only in certain limited circumstances will the registrar use its discretion to place the domain name on ''hold.'' When placed on ''hold,'' the domain name registrant is not changed and the domain name is not ''deleted.'' The domain name is simply placed in suspension so that neither claimant can use it. As of this writing, approximately 2,270 domain names out of 5,000,000 (or .05 of one percent) have been placed on ''hold'' pending resolution, either way, in such trademark—domain name disputes.


(Footnote 13 return)
See MDT v. New York Stock Exchange, 858 F. Supp. 1028 (Pfaelzer, J.).


(Footnote 14 return)
See Academy of Motion Picture Arts and Sciences v. Network Solutions, Inc., 989 F. Supp. 1276, U.S. Dist. LEXIS 20806 (C.D. Cal. 1997) at 1281; Thomas v. Network Solutions, Inc., No. CIV. 97–2412 (TFH), 1998 WL 191205 at *11; Proposed Rule, at 8830 (Department of Commerce objects to any change to domain name registration ''that could significantly limit the flexibility of the Internet, such as waiting periods. . . .'').


(Footnote 15 return)
See Proposed Rule of the U.S. Department of Commerce, National Telecommunications and Information Administration, Regarding Improvement of Technical Management of Internet Names and Addresses, 63 Fed. Reg. 8826, 8827, 1998 WL 66457 (Feb. 20, 1998), at 8830; Panavision, at *9.


(Footnote 16 return)
Ocean Garden, Inc. v. Marktrade Co., Inc., 953 F.2d 500, 506 (9th Cir. 1991).


(Footnote 17 return)
See United States Patent and Trademark Office, Fiscal Year Trademark Statistics, 1997 Workload Tables at 17. This document is publicly available on the Internet at the PTO's ''home page'' located at the URL http://www.uspto.gov.


(Footnote 18 return)
See Proposed Rule, at 8830. (''Infringers, rather than registrars, registries, and technical management bodies, should be liable for trademark infringement.'').


(Footnote 19 return)
**Please see note on page 17.


(Footnote 20 return)
See, Anitesh Barua, Jay Shutter, & Andrew Whinston, ''The Internet Economy Indicators,'', Initial report results issued June 10, 1999 (http://www.internetindicators.com); see also, The Emerging Digital Economy II (http://www.ecommerce.gov/ede/chapter1.html).


(Footnote 21 return)
United States Department, The Emerging Digital Economy II (http://www.ecommerce.gov/ede/chapter1.html).


(Footnote 22 return)
See, Jeri Calusing, ''Casting Too Wide a Net? Critics See Internet Board Overstepping Its Authority,'' The New York Times, 7 June 1999: C1–C2.


(Footnote 23 return)
http://wipo2.wipo.int.


(Footnote 24 return)
See, Letter from Esther Dyson to Ralph Nader and James Love, June 15, 1999 (http://www.icann.org/chairman-response.htm).


(Footnote 25 return)
Courtney Macavinta, ''Domain Restrictions Target Cybersquatters,'' CNET News.com, (May 3, 1999) http://www.news.com/news/Item/o,4,35983,00.html.


(Footnote 26 return)
See, Juno Online Services v. Juno Lighting, Inc., 979 F. Supp. 684 (N.D. Ill. 1997) (mere registration of a domain name is not trademark infringement or misuse even if the use of another's trademark is deliberate).


(Footnote 27 return)
See, Porsche Cars North America, Inc. and Dr. Ing. H.C.F. Porsche A.G. v. Porsch.com, et. al. (the court said that the Trademark Dilution Act cannot be read to permit in rem actions).


(Footnote 28 return)
The Commission has not agreed to this sentence and will raise this issue with the Member States.


(Footnote 29 return)
The Commission does not consider it appropriate to refer directly to the provisions of the Directive or to EU Member State law.


(Footnote 30 return)
This text is not agreed by the Commission on the grounds that only certain requirements of the Directive are deferred for manually processed data.


(Footnote 31 return)
The US notes that explicit (opt in) choice is not necessarily required under the Directive for sensitive information where the processing is: (1) in the vital interests of the data subject or another person; (2) necessary for the establishment of legal claims or defenses; (3) required to provide medical care or diagnosis and will cover this in a Frequently Asked Question (FAQ).


(Footnote 32 return)
The Commission would like text added to the Onward Transfer principle that requires explicit notice and choice when personal data is transferred to a third party that does not adhere to the safe harbor requirements.


(Footnote 33 return)
The Commission proposes to delete the words in square brackets, but could accept alternative wording to show that the right to access is not absolute. Specific obligations under the access principle are spelled out in the FAQs.


(Footnote 34 return)
The Commission would prefer to see this text as a continuation of principle 7. The EC would also like the text to state clearly that all the requirements of principle 7 must be met for all participants in the safe harbor. The EC is consulting its data protection authorities about point (3) in the note.